Ukraine Crisis Webinar Series - Session XIV

1. The Ukraine Crisis & African Economies - Exposure to Global Commodity Trade and Market Disruptions: Impacts on Growth, Poverty, and Food Security in Malawi Dr. Ismael FOFANA Director, Capacity & Deployment AKADEMIYA2063

2. Outline 1. Introduction 2. Analytical Framework 3. Simulation Scenarios 4. Results 5. Conclusion

3. 1. INTRODUCTION - Global Commodity Price Shocks The Russia-Ukraine war has driven up the international prices of global primary commodities Projected Changes in Global Commodity Prices before and after onset of Ukraine Crisis (%) -30 -10 10 30 50 70 90 110 130 150 Coal, Australia Crude oil, Brent Natural gas, Europe Natural gas, U.S. Liquefied natural gas, Japan Cocoa Coffee, Arabica Coffee, Robusta Tea, average Coconut oil Groundnut oil Palm oil Soybean meal Soybean oil Soybeans Barley Maize Rice, Thailand, 5% Wheat, U.S., HRW Bananas, U.S. Meat, beef Meat, chicken Oranges Shrimp Sugar, World Logs, Africa Logs, S.E. Asia Sawnwood, S.E. Asia Cotton A Index Rubber, RSS3 Tobacco DAP Phosphate rock Potassium chloride TSP Urea, E. Europe Aluminum Copper Iron ore Lead Nickel Tin Zinc Gold Silver Platinum Before Ukraine Crisis After onset of Ukraine Crisis Source: World Bank, commodity markets outlook. Retrieved in April 2022

4. 1. INTRODUCTION (cont.) - Country Exposure International Prices of Top Export Commodities (Percentage Annual Changes) Commodities Share Total Exports Baseline Scenario Ukraine Scenario 2022 2023 2024 2022 2023 2024 Tea 9,2 -1,9 -1,9 1,4 -1,5 -3,8 1,2 Groundnuts 3,0 -4,9 2,6 0,8 12,2 -17,4 0,4 Soya beans 1,5 0,9 -6,0 0,9 20,1 -14,3 -0,7 Cane or beet sugar 9,2 -5,1 2,7 0,8 0,0 -2,6 0,0 Tobacco, unmanufactured 52,2 0,6 1,2 0,4 1,1 -2,4 0,4 -10 -5 0 5 10 15 20 25 2022 2023 2024 Export Price Indice Import Price Indice Commodities Share Total Imports Baseline Scenario Ukraine Scenario 2022 2023 2024 2022 2023 2024 Petroleum, not crude 6,9 5,7 -12,2 0,6 42,0 -8,0 -13,0 Palm oil 2,1 -2,3 -2,3 0,4 45,9 -15,2 -2,0 Wheat and meslin 1,5 -2,0 -2,0 0,8 42,9 -15,6 -2,6 Tobacco, unmanufactured 3,6 0,6 1,2 0,4 1,1 -2,4 0,4 Fertilizers, nitrogenous 3,8 -1,3 -20,0 -8,3 76,0 -11,8 -20,0 Iron or non-alloy steel 1,5 -21,2 -7,7 -16,7 -13,6 -25,0 -14,3 International Prices of Top Import Commodities (Percentage Annual Changes) Import and Export Price Indices, Percentage Point Changes between Ukraine and Baseline Scenarios Terms of Trade are projected to deteriorate in 2022 and 2023

5. 2. ANALYTICAL FRAMEWORK • Simulation models (Akademiya2063/ReSAKSS Toolbox)  Single-Country CGE Models • World Development Indicators database (World Bank)  Macroeconomic data • Africa Agricultural Trade Monitoring (A2063/IFPRI)  Import and export data • World Economic Outlook (International Monetary Funds)  Economic Growth Outlook • Primary commodity price database (World Bank)  Annual price predictions for 46 primary commodities (released in April and October) Update the Simulation Models Build the Simulation Scenarios Simulation Tools

6. 3. SIMULATION SCENARIOS “Baseline” scenario No major changes in the economies’ trajectories in the absence of the crisis for the period 2022-2024.  Economic Growth Outlook 2022-2024 (IMF, October 2021)  Commodity Market Outlook 2022-2024 (World Bank, October 2021) “Ukraine” scenario Disruptions to the individual country economies resulting from the changes in global commodity trade and markets  Commodity Market Outlook 2022-2024 (World Bank, April 2022)  Economic Growth Outlook 2022-2024

7. 4. RESULTS - External Trade Effects Limited capacity to respond to rising prices to boost exports -15 -10 -5 0 5 2022 2023 2024 Exports Imports Import and Export Volumes, Percentage Point Change between Ukraine and Baseline Scenarios

8. 4. RESULTS (cont.) - Economic Growth Effects The sharp decline in 2022 put Malawi’s economy on a lower growth trajectory -1 0 1 2 3 4 5 6 2022 2023 2024 Baseline Ukraine GDP Percentage Annual Changes 9000.0 9500.0 10000.0 10500.0 11000.0 11500.0 2021 2022 2023 2024 Baseline Ukraine GDP Level in Billion LCU

9. 4. RESULTS (cont.) - Employment Effects The sharp decline in 2022 put Malawi’s economy on a lower growth trajectory Employment level, Percentage Annual Changes Employment Level in Million Individuals 3.0% 3.9% 3.7% 0.8% 2.6% 3.4% 2022 2023 2024 Baseline Ukraine 29.0 30.0 31.0 32.0 33.0 34.0 35.0 2021 2022 2023 2024 In Million Baseline Ukraine

10. 4. RESULTS (cont.) - Poverty Effects The Russia-Ukraine war likely to reduce the poverty reduction effort of Malawi Change in Headcount Poverty Index Compared to Baseline (Percent)

11. 4. RESULTS (cont.) - Food Security Effects Deterioration in the food security situation, worse among rural than urban households 2022 2023 2024 All Food All Food All Food All 2.4 2.2 2.9 1.8 1.8 2.1 Rural 2.9 2.5 3.2 2.1 2.3 2.3 Urban 1.8 1.7 2.4 1.3 1.2 1.6 Percentage Change in Consumer Price Index, vs Baseline Percentage Change in Household Income, vs Baseline 2022 2023 2024 All -4.5 -5.3 -5.6 Rural -4.8 -6.3 -7.3 Urban -4.1 -4.2 -3.6 2022 2023 2024 All Food All Food All Food All -5.2 -3.9 -6.6 -4.5 -6.6 -5.4 Rural -5.7 -4.3 2.4 -5.3 1.2 -6.6 Urban -4.5 -3.0 -5.2 -3.0 -4.1 -2.9 Percentage Household Consumption, Baseline

12. 5. CONCLUSION Projected Changes in Global Commodity Prices before and after onset of Ukraine Crisis (pp), Comparing April and October 2022 Predictions Mixed picture in the evolution of global commodity prices -40 -20 0 20 40 60 80 100 120 140 160 Coal, Australia Crude oil, Brent Natural gas, Europe Natural gas, U.S. Liquefied natural gas, Japan Cocoa Coffee, Arabica Coffee, Robusta Tea, average Coconut oil Groundnut oil Palm oil Soybean meal Soybean oil Soybeans Barley Maize Rice, Thailand, 5% Wheat, U.S., HRW Bananas, U.S. Meat, beef Meat, chicken Oranges Shrimp Sugar, World Logs, Africa Logs, S.E. Asia Sawnwood, S.E. Asia Cotton A Index Rubber, RSS3 Tobacco DAP Phosphate rock Potassium chloride TSP Urea, E. Europe Aluminum Copper Iron ore Lead Nickel Tin Zinc Gold Silver Platinum All Commodities 27|27. Energy 69|92. Agriculture & Food 18|22. Agriculture raw materiel 26|-17. Fertilizer 71|77. Minerals 14|-1.

13. 5. CONCLUSION (Cont.) Commodities Share Total Exports April 2022 Forecasts October 2022 Forecasts 2022 2023 2024 2022 2023 2024 Tea 9.2 -1.5 -3.8 1.2 15.2 -9.7 0.7 Groundnuts 3.0 12.2 -17.4 0.4 31.6 -4.5 -0.4 Soya beans 1.5 20.1 -14.3 -0.7 14.3 -1.8 -0.2 Cane or beet sugar 9.2 0.0 -2.6 0.0 2.6 -5.0 0.0 Tobacco, unmanufactured 52.2 1.1 -2.4 0.4 1.1 -2.4 0.4 Commodities Share Total Imports April 2022 Forecasts October 2022 Forecasts 2022 2023 2024 2022 2023 2024 Petroleum, not crude 6.9 42.0 -8.0 -13.0 42.0 -8.0 -13.0 Palm oil 2.1 45.9 -15.2 -2.0 12.7 -17.6 0.4 Wheat and meslin 1.5 42.9 -15.6 -2.6 36.5 -4.7 -1.2 Tobacco, unmanufactured 3.6 1.1 -2.4 0.4 1.1 -2.4 0.4 Fertilizers, nitrogenous 3.8 76.0 -11.8 -20.0 49.1 -9.7 -7.7 Iron or non-alloy steel 1.5 -13.6 -25.0 -14.3 -25.9 -16.7 -2.0 Changing Pressure on Terms of Trade Deterioration 2.1% -4.3% -0.2% 37.4% -1.4% -7.5% 2022 2023 2024 April 2022 Forecasts Export Import 5.1% -4.6% -0.3% 27.1% 0.3% -3.8% 2022 2023 2024 October 2022 Forecasts Export Import Evolution of Global Prices for Top Exported Commodities Evolution of Global Prices for Top Imported Commodities

14. THANK YOU

Ukraine Crisis Webinar Series - Session XIV

Ukraine Crisis Webinar Series - Session XIV

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Ukraine Crisis Webinar Series - Session XIV