Commodity prices

Continued commodity price instability

Large, fast-growing and resource-hungry economies like China and India will continue to increase their greater buying power in global markets.  But, because of their less developed regulatory institutions and lack of significant automatic stabilisers  - e.g. income taxes, pensions and welfare payments - their economic growth rates will tend to be more volatile.   This means that unstable and erratic commodity prices (which are closely linked to their growth rates) are set to continue for 2013 and indeed beyond. 

However, it is the citizens of emerging economies that will remain most vulnerable to commodity price swings. Keeping inflation within pre-set thresholds could prove difficult for policymakers worried about hurting those with lower incomes in the absence of a proper social safety net in many emerging economies. Businesses in these countries – and those reliant on commodity inputs - should look to mitigate this risk by incorporating different scenarios in their business plans.