Session III of our Ukraine Crisis Webinar Series will discuss the key findings from AKADEMIYA2063's analysis of global market upheavals in the fertilizer sector with a focus on exposure, contagion & effects on agricultural productivity & growth. Based on AKADEMIYA2063's Ukraine Briefs 3 & 8, the session will analyze the overall impacts of fertilizer sector disruptions, discuss how the disruption of global fertilizer markets is expected to reduce fertilizer use & the potential impacts of the reduction in fertilizer use on agricultural sector outputs.
1. The Ukraine Crisis and African Economies Terms of Trade:
Impacts on Growth, Employment, Poverty, and Food Security
Dr. Ismael FOFANA
Director, Capacity & Deployment
AKADEMIYA2063
3. www.akademiya2063.org
Introduction (1/4)
Ukraine crisis has driven up prices for most primary commodities
Figure 1: Percentage Point Changes in Predicted Prices in 2022 for Primary Commodities
Source: Authors computation from the commodity price database (World Bank, 2022).
-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
Energy Agriculture Beverages Agriculture Food Oils and Meals Agriculture Food
Grains
Agriculture Food Other Food Agriculture Raw
Materials
Timber
Agriculture Raw
Materials Other
Raw Materials
Fertilizers Metals and Minerals Precious Metals
Variation 2021/2022 Before Crisis Variation 2021/2022 After Crisis
Figure 1: World Bank projection of changes in global Commodity Prices Before the Ukraine Crisis
4. www.akademiya2063.org
Major disruptions in the global trade and markets
of primary commodities in 2022
Percentage changes in primary commodity prices 2020-2022, Outlook October 2022 vs. Outlook October 2019
Source: Commodity Market Outlook October 2019 and October 2022 (World Bank, 2019 and 2022)
Note: Price changes for “Coal, Australia” = 366% and “Natural gas, Europe” = 714%.
Introduction (2/4)
5. www.akademiya2063.org
Primary commodities weight heavily in the export basket
of most African countries
0 10 20 30 40 50 60 70 80 90 100
Lesotho
Tunisia
Morocco
Madagascar
Eswatini
Liberia
Ethiopia
Kenya
Sierra Leone
Guinea Bissau
Egypt
Seychelles
Togo
Niger
South Africa
Sudan
Gambia
Tanzania
Senegal
DRC
Rwanda
Benin
Gabon
Cabo Verde
Cote d'Ivoire
Malawi
Guinea
Uganda
CAR
Namibia
Zambia
Ghana
Mauritania
Burkina Faso
Zimbabwe
Mozambique
Botswana
Congo
Chad
Nigeria
Mali
Angola
Cameroon
South Sudan
0 10 20 30 40 50 60 70 80 90 100
South Sudan
Liberia
Ethiopia
Chad
Uganda
DRC
Sudan
Gabon
Seychelles
Ghana
Cameroon
Niger
Sierra Leone
Congo
Morocco
Malawi
Tanzania
South Africa
CAR
Madagascar
Tunisia
Mali
CaboVerde
Eswatini
Kenya
Burkina Faso
Zambia
Angola
Guinea
Mauritania
Nigeria
Egypt
Guinea Bissau
Rwanda
Cote d'Ivoire
Togo
Gambia
Namibia
Senegal
Mozambique
Zimbabwe
Lesotho
Benin
Botswana
Percentage share of primary commodities in total imports in 2019
Percentage share of primary commodities in total exports, 2019
Source: Calculations from AATM 2022 database (Akademiya2063 and IFPRI, 2022) Source: Calculations from AATM 2022 database (Akademiya2063 and IFPRI, 2022)
Introduction (3/4)
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Introduction (4/4)
1.1. Change in a country’s
terms of trade (TOT) and the
real exchange rate
• Shift in domestic prices of
export and import
competing (tradable)
goods relative to prices of
non-tradable goods
2. Transmission of global
price changes to individual
domestic sectors
• Impact of induced
changes in domestic
prices of fertilizer, wheat
products, or local staples
Impact Channels of Global Market Disruptions
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Effects of trade disruptions across countries depend on:
o Change in the price of each of the 46 commodities
o Share country’s import and export baskets.
Higher increase in imports prices relative to prices of exports
negative impact on the economy
Higher increase in exports prices relative to prices of import
positive impact on the economy
Terms of Trade Impact (1/4)
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Percentage Changes in
Term of Trade 2022
Heterogeneity in Terms of Trade Shocks
Source: Calculations from Commodity Market Outlook (World Bank, 2019 and 2022) and AATM 2022 database (Akademiya2063, 2022)
Growth and Poverty
assessment in ten
(10) African countries:
• Benin
• Ghana
• Kenya
• Nigeria
• Malawi
• Mozambique
• Senegal
• South Africa
• Tanzania
• Uganda
Terms of Trade Impact (2/4)
9. www.akademiya2063.org
TOTW Countries facing improving terms of trade
12.1
9.5
12.0
25.4 24.5
-3.9 -2.6 -4.0
2.3
-1.9 -0.8
-3.4
-1.0
-10.0
-2.9
5.2
2.6
11.0
6.1
8.8
-0.6
0.4 0.0 0.8
-1.0 -0.7 -0.6
-3.0 -2.7 -2.3
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Benin
Ghana
South
Africa
Nigeria
Mozambique
Benin
Ghana
South
Africa
Nigeria
Mozambique
Benin
Ghana
South
Africa
Nigeria
Mozambique
2022 2023 2024
Export Price Index Import Price Index
Figure2: Import and Export Price Indices, Percentage Point Changes between Ukraine and Baseline Scenarios
Terms of Trade Impact (3/4)
10. www.akademiya2063.org
TOTL Countries facing deteriorating terms of trade
2.1
5.0 5.3
11.0
3.9
-0.8
-4.7
-3.5
-1.2 -2.3
-0.4 -1.3 -1.1
-4.3
-0.6
15.2
22.6
17.0 16.2
8.9
-1.4 -0.3 -0.6 -1.2 -0.6
-4.8 -5.6
-3.1
-5.2
-2.1
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
Kenya Malawi Uganda Senegal Tanzania Kenya Malawi Uganda Senegal Tanzania Kenya Malawi Uganda Senegal Tanzania
2022 2023 2024
Export Price Index Import Price Index
Figure 3: Import and Export Price Indices, Percentage Point Changes between Ukraine and Baseline Scenarios
Terms of Trade Impact (4/4)
11. Analytical Framework
• Simulation models (Akademiya2063/ReSAKSS Toolbox)
Single-Country CGE Models
Micro-Simulation Models
• World Development Indicators database (World Bank)
Macroeconomic data
• Statistics on international trade (United Nations)
Import and export data
• Primary commodity price database (World Bank)
Monthly price estimates for 46 primary commodities
Annual price predictions (CMO released in April and
October)
Update the
Simulation
Models
Build the
Price
Scenario
Simulation
Tools
12. www.akademiya2063.org
Simulation Scenarios
Source: Authors computation from the AATM database (Akademiya2063 & IFPRI, 2022) and the commodity price database (World Bank, 2022).
“Baseline” scenario: no major changes in the
economies’ trajectories, growth, employment,
poverty, and food consumption levels in the
absence of the crisis for the period 2022-2024.
“Ukraine” scenario: disruptions to the individual
country economies resulting from the changes in
global commodity markets
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Poverty Effects (1/7)
Countries facing deteriorating terms of trade
TOTL
Figure 8: Change in Headcount Poverty Poverty Index compared to Baseline
Kenya Malawi
Higher rates of poverty continue into 2023 before stabilizing in 2024 for Kenya and Malawi
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Poverty Effects (2/7)
Countries facing deteriorating terms of trade
TOTL
Figure 8: Change in Headcount Poverty Poverty Index compared to Baseline (Cont.)
Uganda Senegal
Poverty rates continue to climb past 2022-2024 in Uganda and Senegal.
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Poverty effects (3/7)
Countries facing deteriorating terms of trade
TOTL
Tanzania is the only country in this group to reverse the rising poverty trends back towards baseline levels .
Figure 8: Change in Headcount Poverty Poverty Index compared to Baseline (Cont.)
Tanzania
18. www.akademiya2063.org
Poverty effects (4/7)
Countries facing improving terms of trade
TOTW
Benin
Figure 9: Change in Headcount Poverty Poverty Index compared to Baseline
Nigeria
Difference among countries: a stronger decline in poverty rates is observed, for instance, in Benin and Nigeria,
compared to Ghana and South Africa.
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Poverty Effects (5/7)
Countries facing improving terms of trade
TOTW
South Africa
Figure 9: Change in Headcount Poverty Poverty Index compared to Baseline (Cont.)
Ghana
Difference among countries: a stronger decline in poverty rates is observed, for instance, in Benin and Nigeria,
compared to Ghana and South Africa.
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Poverty Effects (6/7)
Countries facing improving terms of trade
TOTW
Mozambique
Figure 9: Change in Headcount Poverty Poverty Index compared to Baseline (Cont.)
Mozambique stands out as the only country in this group which registers rising poverty rates.
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Share of Top Export
Commodities in Total Exports,
MOZAMBIQUE
Coal 17.9
Petroleum oils 6.0
Wood sawn 1.9
Tobacco 5.3
Aluminium 24.5
Copper 2.0
Gold 4.6
Share of Top Export
Commodities in Total
Exports, BENIN
Gold 31.8%
Petroleum oils 2.6%
Soya beans 9.1%
Wood sawn 1.2%
Cotton 25.4%
Trading patterns diversification leads to different poverty outcomes of global
commodity price shocks
Source: Calculations from simulation results (Akademiya2063, 2022)
-0.8 -0.7
1.6
-1.2
0.0
Benin Ghana Mozambique Nigeria South Africa
Countries facing improving terms of trade
Source: AATM 2022 database (Akademiya2063 and IFPRI, 2022) Source: AATM 2022 database (Akademiya2063 and IFPRI, 2022)
Poverty Effects (7/7)
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Positive terms of trade effects or TOT
winners (TOTW)
Negative poverty and food security
outcomes
Mozambique
Positive terms of trade effects or TOT
winners (TOTW)
Positive poverty and food security
outcomes
Benin, Ghana, Nigeria, South Africa
Negative terms of trade effects or TOT
losers (TOTL)
No recovery by 2024
Kenya, Malawi, Uganda
Negative terms of trade effects or TOT
losers (TOTL)
Early recovery by 2024
Senegal, Tanzania
Conclusion
4 groups identified: