AKADEMIYA2063-Ecowas Regional Learning event: Trade in Times of COVID-19 Pandemic

1. TRADE IN TIMES OF COVID-19 PANDEMIC: EFFECTS OF GLOBAL PRIMARY COMMODITY MARKET DISRUPTION ON GROWTH AND POVERTY IN WESTERN AFRICA Ismael FOFANA AKADEMIYA2063 - Director for Capacity and Deployment West Africa Regional Learning Event – February 11, 2021

2. 1. Introduction Impact of the COVID-19 pandemic on primary commodity prices: A mix picture Changes in primary commodities prices between 2019 and 2020, percentage point difference between estimated and predicted prices for 2020 -40 -30 -20 -10 0 10 20 30 40 Coal, Australia Crude oil, avg Natural gas, Europe Natural gas, US Natural gas LNG, Japan Cocoa Coffee, Arabica Coffee, Robusta Tea, auctions (3), average Coconut oil Groundnut oil Palm oil Soybean meal Soybean oil 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 Cotton A Index Rubber, Malaysian Tobacco DAP Phosphate rock Potassium chloride TSP Urea, E. Europe, bulk Aluminum Copper Iron ore Lead Nickel Tin Zinc Gold Silver Platinum

3. 1. Introduction (Cont’d) High contribution of primary commodities in exports of West African countries Share of primary commodities in total IMPORTS Share of primary commodities in total EXPORTS 0 10 20 30 40 50 60 70 80 90 100 Guinea-Bissau Nigeria Ghana Sierra Leone Mauritania Burkina Faso Niger Côte d’Ivoire Benin Guinea Cabo Verde Mali Senegal Gambia Liberia Togo 0 10 20 30 40 50 60 70 80 90 100 Gambia Benin Senegal Côte d’Ivoire Burkina Faso Mali Guinea-Bissau Nigeria Guinea Togo Cabo Verde Sierra Leone Mauritania Ghana Niger Liberia

4. 1. Introduction (Cont’d) Mix of agricultural and mineral commodities in the export basket of West African countries Percentage Share of Selected Primary Commodities in the Export Basket of West African Countries Petroleum Petroleum Petroleum Petroleum Petroleum Petroleum Petroleum Cocoa Cocoa Cocoa Cocoa Cocoa Cotton Cotton Cotton Cotton Cotton Cotton Nuts Nuts Nuts Nuts Nuts Nuts Nuts Nuts Wood Wood Fish Fish Fish Fish Fish Fish Aluminium Aluminium Aluminium Copper Iron Iron Iron Iron Titanium Titanium Diamonds Gold Gold Gold Gold Gold Gold Gold Gold Gold Gold 0 10 20 30 40 50 60 70 80 90 100 BEN BFA CBV CIV GMB GHA GIN GNB LIB MLI MRT NER NGA SEN SRL TGO

5. 1. Introduction (Cont’d) Objective: Assess the effects of changing international commodity prices and global market disruptions on economic growth and poverty in Western Africa, with focus on: • Agricultural Commodities • All Primary Commodities Geographical coverage: 16 West African countries Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo.

6. 2. Analytical Framework and Data • Simulation models (Akademiya2063 / ReSAKSS)  Single-Country CGE Models  Micro-Simulation Models • World Development Indicators database (World Bank)  Macroeconomic data (2019/2018) • Statistics on international trade (United Nations)  Import and export data (2019/2018) • Primary commodity price database (World Bank)  Monthly price estimates for 46 primary commodities  Annual price predictions (Commodity market outlook released in April and October) Update the Simulation Models Build the Price Scenario

7. 3. Scenarios  Changes in the international price of primary commodities (Price Shock) • Commodities Prices Estimate for 2019 and 2020 (COVID Scenario) • Commodity Prices Outlook for 2020 released on October 2019 (Baseline or BaU Scenario)  Disruption of global trade conditions and market access (Trade Shock) • Sensitivity tests on trade elasticities; i.e., from “minor disruptions” to “severe disruptions”

8. 3. Scenarios (Cont’d) Export price scenario is based on the composition of the basket of primary commodities exported by each country Changes in Prices of Top Primary Commodities Exported by Ghana (%) Share of Top Primary Commodities in Ghana’s Total Exports in 2019 Gold 37.0 % Petroleum 31.7 % Cocoa 16.0 % Fish 1.2 % Palm oil 0.6 % Wood 0.5 % Aluminium 0.5 % Rubber 0.4 % Other primary commodities 2.0 % Other commodities 10.2 % 21.6 -27.3 0.6 1.1 28.9 1.1 -3.1 1.3 Gold Petroleum Cocoa Fish Palm oil Wood Aluminium Rubber

9. Share of Top Primary Commodities in Ghana’s Total Imports in 2019 Changes in Prices of Top Primary Commodities Imported by Ghana (%) 3. Scenarios (Cont’d) Import price scenario is based on the composition of the basket of primary commodities imported by each country Rice 3.6 % Petroleum 2.7 % Wood Product 2.8 % Fish 2.0 % Wheat 1.5 % Sugar 1.5 % Palm Oil 1.3 % Iron Products 7.2 % Other primary commodities 4.6 % Other commodities 72.7 % 18.4 -27.3 1.1 1.1 4.3 -1.7 28.9 29.4 Rice Petroleum Wood Product Fish Wheat Sugar Palm Oil Iron Products

10. 3. Scenarios (Cont’d) Deterioration in the TOT for agricultural commodities in most WA countries Changes in the Terms of Trade for ALL PRIMARY COMMODITIES, Percentage Point Difference between COVID vs. BaU Scenarios -20 -10 0 10 20 Benin Guinea Bissau Nigeria Mali Burkina Faso Sierra Leone Gambia, The Niger Ghana Guinea Cote d'Ivoire Togo Liberia Cabo Verde Mauritania Senegal Changes in the Terms of Trade for AGRICULTURAL COMMODITIES, Percentage Point Difference between COVID and BaU Scenarios -20 -10 0 10 20 Benin Guinea Bissau Nigeria Mali Burkina Faso Sierra Leone Gambia, The Niger Ghana Guinea Cote d'Ivoire Togo Liberia Cabo Verde Mauritania Senegal

11. 4. Results Negative growth effects of commodity price and trade shocks in most WA countries Percentage point change in GDP growth, COVID vs. BaU Scenarios, Price and Trade Shocks -6 -4 -2 0 2 4 6 Benin Burkina Faso Cabo Verde Cote d'Ivoire Gambia, The Ghana Guinea Guinea Bissau Liberia Mali Mauritania Niger Nigeria Senegal Agriculture Primary

12. 4. Results (Cont’d) Increase in poverty driven by agricultural commodity price and trade shocks Changes in Poverty Headcount Ratio, COVID vs. BaU Scenario, Price and Trade Shocks (pp) -2 0 2 4 6 8 10 12 14 16 Benin Guinea Bissau Nigeria Mali Burkina Faso Sierra Leone Gambia, The Niger Ghana Guinea Cote d'Ivoire Togo Liberia Senegal Primary Agriculture

13. 4. Results (Cont’d) Increase in urban and rural poverty in WA countries Changes in urban and rural poverty, COVID vs. BaU Scenarios, Agri. Com. Price and Trade Shocks (pp) Changes in urban and rural headcount poverty rates, COVID vs. BaU Scenario, All Primary Commodity Price and Trade Shocks (pp) -2 0 2 4 6 8 10 12 14 16 Benin Guinea Bissau Nigeria Mali Burkina Faso Sierra Leone Gambia, The Niger Ghana Guinea Cote d'Ivoire Togo Liberia Senegal Urban Rural -2 0 2 4 6 8 10 12 14 16 Benin Guinea Bissau Nigeria Mali Burkina Faso Sierra Leone Gambia, The Niger Ghana Guinea Cote d'Ivoire Togo Liberia Senegal Urban Rural

14. Protect rural and urban populations  Scale social protection schemes 5. Conclusion Export diversification  Increase the contribution of agricultural and food commodities in the export basket (e.g., Nigeria)  Increase the number of agricultural and food commodities in the export basket, i.e., raw material, agri-food products, and processed food (e.g., Benin) Support the rural economy  Increase public agricultural investments  Accelerate the implementation of agricultural policies

AKADEMIYA2063-Ecowas Regional Learning event: Trade in Times of COVID-19 Pandemic

AKADEMIYA2063-Ecowas Regional Learning event: Trade in Times of COVID-19 Pandemic

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AKADEMIYA2063-Ecowas Regional Learning event: Trade in Times of COVID-19 Pandemic