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TRADE IN TIMES OF COVID-19 PANDEMIC:
EFFECTS OF GLOBAL PRIMARY COMMODITY MARKET
DISRUPTION ON GROWTH AND POVERTY IN SOUTHE...
AKADEMIYA2063 COVID-19 Workstreams
Mapping
community
vulnerability
Tracking food
staples price
changes
Food
production
sys...
OUTLINE
I. INTRODUCTION
II. METHOD
III. FINDINGS
IV. CONCLUSION
I. INTRODUCTION
Why assessing the effects of global primary commodity market disruption?
• The COVD-19 pandemic affects African
economies ...
The COVID-19 pandemic has driven most primary commodity prices down in 2020
-50
-40
-30
-20
-10
0
10
20
Coal,Australia
Cru...
Heavy contribution of primary commodities in countries exports
96 94 94 93
87 87
81
59
32
8
Angola
Botswana
Mozambique
Zim...
Objective
Assess the effects of the change in the international
commodity price of primary commodities and global
market d...
II. METHOD
Analytical Framework
• Simulation models (Akademiya2063 / ReSAKSS)
 Single-Country CGE Models
 Micro-Simulation Models
•...
Scenarios
 Changes in the international price of
primary commodities (Price Shocks)
 Disruption of global trade conditio...
Scenarios (Cont’d)
 2019 price estimates
 2020 price forecasts
Baseline (or BaU) scenario
Price forecasts for the year 2...
Primary commodity price scenario based on the composition of the basket of
primary commodities exported and imported by ea...
Share of Top Ten Primary Commodities in Malawi’s Total Imports,
in 2017
Changes in predicted Prices for Top Ten Primary
Co...
Declined International Price of Export Commodities
Angola -35.7
Zambia -13.7
Mozambique -10.4
Lesotho -6.5
Zimbabwe -4.7
S...
South Africa
(-4.1)
Zimbabwe
(-4.7)
Lesotho
(-6.5)
Mozambique
(-10.4)
Zambia
(-13.7)
Angola
(-35.7)
Namibia
-0.9
Malawi
(-...
Zimbabwe -25.8
South Africa -22.2
Zambia -21.0
Eswatini -18.4
Mozambique -18.4
Lesotho -18.3
Angola -16.4
Namibia -15.6
Ma...
Impact of the world price changes on individual economies depends on the
contribution of primary commodities in countries ...
III. FINDINGS
Real Exchange Rate Depreciation
-5 0 5 10 15 20 25 30 35 40 45 50
Angola
Zimbabwe
Zambia
Mozambique
South Africa
Malawi
Na...
Percentage Change in Nominal Exchange Rates in 2019 and 2020
-40 -35 -30 -25 -20 -15 -10 -5 0 5
Angola Kwanza
Botswana Pul...
Positive Growth Effects of Primary Commodity Price Shocks
Percentage point change in GDP growth, COVID vs. BaU, Price Shoc...
Mixed Growth Effects of Primary Commodity Price and Trade Shocks
Percentage point change in GDP growth, COVID vs. BaU, Pri...
Change in Poverty Headcount Ratio, COVID vs.
Baseline, Price Shock (pp)
Change in Poverty Headcount Ratio, COVID vs.
Basel...
Increased rural poverty more than urban poverty
Change in urban and rural poverty,
COVID vs. Baseline, Price Shock (pp)
Ch...
IV. CONCLUSION
Key findings
• Decline in the international price of primary commodities traded
by Southern African countries.
• Negative ...
Policy Options
• Protect vulnerable populations
• Support the rural economy
• Diversify the external trade
Policy Options
Protect rural and urban populations
• Scale social protection schemes
Support the rural economy
• Increase ...
Policy Options
Export diversification
• More agricultural and food commodities and other high value-
added commodities in ...
THANK YOU
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Effects of Gobal Primary Commodity Market Disruption on Growth and Poverty in Southern Africa

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A presentation by Dr. Ismael Fofana, Director, Capacity & Deployment, AKADEMIYA2063

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Effects of Gobal Primary Commodity Market Disruption on Growth and Poverty in Southern Africa

  1. 1. TRADE IN TIMES OF COVID-19 PANDEMIC: EFFECTS OF GLOBAL PRIMARY COMMODITY MARKET DISRUPTION ON GROWTH AND POVERTY IN SOUTHERN AFRICA Ismael FOFANA Director, Department of Capacity & Deployment AKADEMIYA2063 Webinar on November 12, 2020
  2. 2. AKADEMIYA2063 COVID-19 Workstreams Mapping community vulnerability Tracking food staples price changes Food production systems disruption Global trade disruption and the effects on growth and Poverty in Africa www.akademiya2063.org
  3. 3. OUTLINE I. INTRODUCTION II. METHOD III. FINDINGS IV. CONCLUSION
  4. 4. I. INTRODUCTION
  5. 5. Why assessing the effects of global primary commodity market disruption? • The COVD-19 pandemic affects African economies through several channels including,  Global market disruption and the change in the international price of primary commodities • The COVID-19 pandemic has driven most primary commodity prices down in 2020. • Heavy contribution of primary commodities in the export basket of Southern African countries.
  6. 6. The COVID-19 pandemic has driven most primary commodity prices down in 2020 -50 -40 -30 -20 -10 0 10 20 Coal,Australia Crudeoil,avg Naturalgas,Europe Naturalgas,US NaturalgasLNG,Japan Cocoa Coffee,Arabica Coffee,Robusta Tea,auctions(3),average Coconutoil Groundnutoil Palmoil Soybeanmeal Soybeanoil Soybeans Barley Maize Rice,Thailand,5% Wheat,US,HRW Bananas,US Meat,beef Meat,chicken Oranges Shrimp,Mexico Sugar,World Logs,Cameroon Logs,Malaysia Sawnwood,Malaysia CottonAIndex Rubber,Malaysian Tobacco DAP Phosphaterock Potassiumchloride TSP Urea,E.Europe,bulk Aluminum Copper Ironore Lead Nickel Tin Zinc Gold Silver Platinum Changes in predicted prices in 2020 for primary commodities prices between April 2020 and October 2019 forecast
  7. 7. Heavy contribution of primary commodities in countries exports 96 94 94 93 87 87 81 59 32 8 Angola Botswana Mozambique Zimbabwe Zambia Namibia Malawi SouthAfrica Eswatini Lesotho 55 51 49 49 46 40 40 39 33 32 Angola Botswana Mozambique Zimbabwe Zambia Namibia Malawi SouthAfrica Eswatini Lesotho Primary commodities imports, share of total importsPrimary commodities exports, share of total exports
  8. 8. Objective Assess the effects of the change in the international commodity price of primary commodities and global market disruptions on • Economic growth • Poverty (Income) Case studies from Southern Africa Angola, Botswana, Eswatini, Lesotho, Malawi, Mozambique, Namibia, South Africa, Zambia, and Zimbabwe
  9. 9. II. METHOD
  10. 10. Analytical Framework • Simulation models (Akademiya2063 / ReSAKSS)  Single-Country CGE Models  Micro-Simulation Models • Primary commodity price predictions (World Bank)  Commodity Markets Outlook: October 2019 and April 2020 • Statistics on international trade (United Nations)  Import and export data (2019/2018)
  11. 11. Scenarios  Changes in the international price of primary commodities (Price Shocks)  Disruption of global trade conditions and international market access (Trade Shocks)
  12. 12. Scenarios (Cont’d)  2019 price estimates  2020 price forecasts Baseline (or BaU) scenario Price forecasts for the year 2020 in October 2019 COVID scenario Price forecasts for the year 2020 in April 2020 Changes in the international price of primary commodities
  13. 13. Primary commodity price scenario based on the composition of the basket of primary commodities exported and imported by each country Changes in predicted Prices for Top Ten Primary Commodities Exported by MalawiShare of Top Ten Primary Commodities in Malawi’s Total Exports, in 2017
  14. 14. Share of Top Ten Primary Commodities in Malawi’s Total Imports, in 2017 Changes in predicted Prices for Top Ten Primary Commodities Imported by Malawi Primary commodity price scenario based on the composition of the basket of primary commodities exported and imported by each country (Cont’d) 14 -37.5 -13.2 -4.1 -12.9 -1.7 3.9 -14.5 -7.8 -9.6 2.3 Petroleumoils Fertilisers,nitrogen Wheatandmeslin Fertilisers,mixed Unmanufacturedtobacco Flat-rolledproductsofiron Structures Maize(corn) Pneumatictyres,ofrubber Soya-beanoil
  15. 15. Declined International Price of Export Commodities Angola -35.7 Zambia -13.7 Mozambique -10.4 Lesotho -6.5 Zimbabwe -4.7 South Africa -4.1 Malawi -2.3 Namibia -0.9 Botswana 7.5 Eswatini 8.0
  16. 16. South Africa (-4.1) Zimbabwe (-4.7) Lesotho (-6.5) Mozambique (-10.4) Zambia (-13.7) Angola (-35.7) Namibia -0.9 Malawi (-2.3) Botswana (7.5) Eswatini (8.0) (-37.5) (-15.8) (-7.7) (-8.9) (7.7) (7.7) (-8.2) (-1.7) (9.3) (-23.6) (-1.7) (3.7) (11.5) (0.7) (5.8) (3.9) (-14.5) (-11.8) (7.7) (-21.6) (-15.8) (9.3) (-4.1) (11.5) (-37.5) Declined International Price of Export Commodities (Cont’d)
  17. 17. Zimbabwe -25.8 South Africa -22.2 Zambia -21.0 Eswatini -18.4 Mozambique -18.4 Lesotho -18.3 Angola -16.4 Namibia -15.6 Malawi -15.5 Botswana -5.8 Declined International Price of Import Commodities
  18. 18. Impact of the world price changes on individual economies depends on the contribution of primary commodities in countries external trade Percentage point change in export and import weighted average prices, COVID scenario compared to the baseline scenario -35 -30 -25 -20 -15 -10 -5 0 5 10 Angola Zambia Mozambique Zimbabwe SouthAfrica Malawi Namibia Lesotho Eswatini Botswana Export Price Index Import Price Index A B CC
  19. 19. III. FINDINGS
  20. 20. Real Exchange Rate Depreciation -5 0 5 10 15 20 25 30 35 40 45 50 Angola Zimbabwe Zambia Mozambique South Africa Malawi Namibia Lesotho Eswatini BotswanaChange in Real Exchange Rates, COVID vs. BaU, Price Shocks Change in Real Exchange Rates, COVID vs. BaU, Price & Trade Shocks -5 0 5 10 15 20 25 30 35 40 45 50 Angola Zimbabwe Zambia Mozambique South Africa Malawi Namibia Lesotho Eswatini Botswana
  21. 21. Percentage Change in Nominal Exchange Rates in 2019 and 2020 -40 -35 -30 -25 -20 -15 -10 -5 0 5 Angola Kwanza Botswana Pula Eswatini Lilandeni Lesotho Loti Malawi Kwacha Mozambique New Metical Namibian Dollar South African Rand Zambian Kwacha Jan-Oct 2020 Jan-Dec 2019 Real Exchange Rate Depreciation (Cont’d)
  22. 22. Positive Growth Effects of Primary Commodity Price Shocks Percentage point change in GDP growth, COVID vs. BaU, Price Shocks -11 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 Angola Zimbabwe Zambia Mozambique South Africa Malawi Namibia Lesotho Eswatini Botswana AAAABBBBCC
  23. 23. Mixed Growth Effects of Primary Commodity Price and Trade Shocks Percentage point change in GDP growth, COVID vs. BaU, Price and Trade Shocks -11 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 Angola Zimbabwe Zambia Mozambique South Africa Malawi Namibia Lesotho Eswatini Botswana AAAABBBBCC
  24. 24. Change in Poverty Headcount Ratio, COVID vs. Baseline, Price Shock (pp) Change in Poverty Headcount Ratio, COVID vs. Baseline, Price and Trade Shocks (pp) Increased Poverty Effects 9.6 0.3 -1.1 -0.9 -0.9 -0.8 -0.8 -0.5 Angola Zambia Mozambique South Africa Malawi Namibia Lesotho Eswatini 8.0 0.3 3.1 -0.3 0.7 -0.5 0.0 0.2 Angola Zambia Mozambique South Africa Malawi Namibia Lesotho Eswatini Note: Optimistic scenario refer to minor global trade disruptions. Note: Pessimistic scenario refers to major global trade disruptions.
  25. 25. Increased rural poverty more than urban poverty Change in urban and rural poverty, COVID vs. Baseline, Price Shock (pp) Changes in urban and rural headcount poverty rates, COVID vs. Baseline, Price and Trade Shock (pp) -2 0 2 4 6 8 10 12 Angola Zambia Mozambique Malawi Namibia Lesotho Eswatini Rural Urbain Note: Pessimistic scenario refers to major global trade disruptions. -5 0 5 10 15 Angola Zambia Mozambique Malawi Namibia Lesotho Eswatini Rural Urbain Note: Optimistic scenario refers to minor global trade disruptions.
  26. 26. IV. CONCLUSION
  27. 27. Key findings • Decline in the international price of primary commodities traded by Southern African countries. • Negative effects on economic growth in several Southern African countries - Angola, Botswana, Malawi, Zambia, and Zimbabwe. • Negative effects on poverty in several Southern African countries – Angola, Eswatini, Malawi, Mozambique, and Zambia. • Increase in rural poverty more than urban poverty in Southern Africa.
  28. 28. Policy Options • Protect vulnerable populations • Support the rural economy • Diversify the external trade
  29. 29. Policy Options Protect rural and urban populations • Scale social protection schemes Support the rural economy • Increase public agricultural investments • Accelerate the implementation of policies for agriculture
  30. 30. Policy Options Export diversification • More agricultural and food commodities and other high value- added commodities in the export basket. Import diversification • More primary commodities (input used) in the import basket
  31. 31. THANK YOU

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