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This paper studies the economic impact of fragmentation of commodity trade. We assemble a novel dataset of production and bilateral trade flows of the 48 most important energy, mineral and agricultural commodities. We develop a partial equilibrium framework to assess which commodity markets are most vulnerable in the event of trade disruptions and the economic risks that they pose. We find that commodity trade fragmentation – which has accelerated since Russia’s invasion of Ukraine – could cause large price changes and price volatility for many commodities. Mineral markets critical for the clean energy transition and selected agricultural commodity markets appear among the most vulnerable in the hypothetical segmentation of the world into two geopolitical blocs examined in the paper. Trade disruptions result in heterogeneous impacts on economic surplus across countries. However, due to offsetting effects across commodity producing and consuming countries, surplus losses appear modest at the global level.

Malaysia

International Monetary Fund. Asia and Pacific Dept

Published: 2024-03-10

Total Pages: 114


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Malaysia’s growth momentum has slowed but remains resilient to external headwinds. While monetary policy has paused its tightening cycle, fiscal policy is consolidating, and the ringgit had been under pressure through most of 2023. The government’s commitment to the reform priorities outlined in its national strategic plans is yet to fully materialize, with the economy’s path to high-income status hanging in the balance.
The GCC region’s non-hydrocarbon growth momentum remains strong, driven by higher domestic demand, increased gross capital inflows, and reform implementation. Oil production – which depends on OPEC+ decisions – will be subdued in the near term. Inflation is contained and current account surpluses are high. Fiscal balances remain healthy, supported by fiscal reforms and high oil prices. The primary non-oil deficits are expected to decrease to 24 percent of GDP by 2028, with higher non-oil revenue reflecting sustained fiscal and structural reforms and contained expenditures. High global uncertainty is weighing on the outlook.
The transition to a low-carbon economy, which is needed to mitigate climate change and meet the Paris Agreement temperature goals, has been affected by the supply chain and energy supply disruptions that originated during the COVID-19 pandemic, the Russian invasion of Ukraine, and the subsequent energy crisis and exacerbation of geopolitical tensions. These developments, and the broader context of the ongoing “polycrisis,” can affect future decarbonization scenarios. This reflects three main factors: (1) pullbacks in climate mitigation policies and increased carbon lock-in in fossil fuel infrastructure and policymaking; (2) the decreasing likelihood of continuous cost reduction in renewable energy technologies; and (3) the likely intensification of macroeconomic shocks amid increasing geoeconomic fragmentation, and the associated policy responses. In this context, the note assesses the implications of the polycrisis for hypothetical scenarios used to assess climate-related financial risks. Following an analysis of the channels through which these effects are likely to materialize over short- and long-term horizons and some policy implications, the note proposes potential adjustments to the design of the climate scenarios used by financial institutions, central banks, and financial sector supervisors and regulators within their risk management frameworks.
Geoeconomic fragmentation (GEF) is becoming entrenched worldwide, and the European Union (EU) is not immune to its effects. This paper takes stock of GEF policies impinging on—and adopted by—the EU and considers how exposed the EU is through trade, financial and technological channels. Motivated by current policies adopted by other countries, the paper then simulates how various measures—raising costs of trade and technology transfer and fossil fuel prices, and imposition of sectoral subsidies—would affect the EU economy. Due to its high-degree of openness, the EU is found to be exposed to GEF through multiple channels, with simulated losses that differ significantly across scenarios. From a welfare perspective, this suggests the need for a cautious approach to GEF policies. The EU’s best defence against GEF is to strengthen the Single Market while advocating for a multilateral rules-based trading system.
Global polycrisis refers to the simultaneous occurrence of multiple interconnected crises. It is marked by the convergence and interaction of combined events, such as geopolitical tensions, economic instability, environmental degradation, public health emergencies, and social disturbance. In this context, this book explores the challenges and opportunities encountered by the Global South amid political instability, climate change, humanitarian crises, technological advancements, and regional cooperation. The book adopts a multidisciplinary framework, integrating theoretical studies with empirical cases from various southern regions in Africa, Asia, and Latin America. This approach helps to foster an in-depth understanding of the complex challenges associated with development in these regions. The book emphasizes the perspectives and experiences of Global South countries, providing a platform for their voices to be heard. This allows readers to gain a more nuanced understanding of the unique contexts, perspectives, and successful experiences of countries in Africa, Asia, and Latin America. Furthermore, it investigates issues such as governance, security, migration, development, and emergent technologies, illuminates the role of regional organizations in fostering regional integration, peace, and stability and ultimately, provides a comprehensive and refined analysis of the Global South that challenges prevalent stereotypes and offers new perspectives on the world’s complex realities today. It includes case studies that enhance the practical relevance of the book, offering real-world examples that illustrate the theoretical concepts and highlightingsuccessful approaches to addressing development challenges. The book will appeal to scholars, researchers, and students interested in comprehending and addressing the challenges encountered by the Global South in a time of global polycrisis.
The latest World Economic Outlook reports signs that policy tightening is starting to cool activity despite core inflation proving persistent. Risks are more balanced as banking sector stress has receded, but they remain tilted to the downside. Monetary policy should stay the course to bring inflation to target, while fiscal consolidation is needed to tackle soaring debts. Structural reforms are crucial to revive medium-term growth prospects amid constrained policy space.
This paper studies the potential effects of geoeconomic fragmentation (GEF) in the sub-Saharan Africa region (SSA) through quantifying potential long-term economic costs. The paper considers two alternative GEF scenarios in which trade relations are fully or partially curtailed across world economies. Our quantification relies on a multi-country multi-sector general equilibrium model and takes a deep dive into the impact across SSA’s oil-rich, other resource-rich and non-resource-rich countries. The results are based on a detailed dataset including information for 136 tradable primary commodity and 24 manufacturing and services sectors in 145 countries—32 of which are in SSA. We find that under GEF, SSA could experience long-term wellfare losses of approximately 4 percent of GDP, twice the losses of the rest of the world. This strong effect results from the large losses of other resource-rich and non-resource rich countries in SSA, given their high dependence on commodity trade. However, if the world experiences a less severe GEF-induced trade disruption—a strategic decoupling—SSA countries could derive minor gains from the re-shuffling of global market supply, specially in energy products.
This year’s report provides the external sector assessment of 30 of the world’s largest economies on the basis of their 2023 data. With tight monetary policy conditions in key advanced economies continuing in 2023, the US dollar remained strong in 2023 and early 2024 by historical standards, while other reserve currency movements have been mixed. Net capital inflows to emerging market and developing economies recovered slightly from the lows experienced in 2022 but remained negative in 2023. Gross inflows and outflows in emerging markets declined, however. Against this background, the global current account balance (defined as the cross-country sum of absolute values of current account) narrowed significantly in 2023, while the excess global current account balance (in excess of the current account norms) has remained broadly unchanged relative to 2022. The report also analyzes the historical pattern in the external sector implications of energy price swings. Energy-importing countries are exposed to adverse effects of negative oil supply shocks but can adopt several policy measures to soften the impact. Possible implications of the clean energy transition and the evolving correlation between the oil price and US dollar are discussed. Lastly, the report contains external sector assessments of individual economies, which are based on a wide range of methods including a multilaterally consistent model of current accounts.