Reversing the setback to global poverty – will a commodity super-cycle help?

The pandemic has caused a massive increase in global poverty, wiping so far almost a decade’s worth of progress in its eradication. The first target of the Sustainable Development Goals (SDG) – eradicating extreme poverty for all people everywhere by 2030 – is now further out of reach. Yet, SDG 1.1 could still be attained through rapid progress in poverty reduction. This is all the more imperative as high poverty levels have adverse implications for the global fight against the pandemic.

The pace of global poverty reduction decelerated abruptly with the commodity price crash of 2014–2015, which marked the end of a decade-long boom in commodity prices – one which contributed greatly to reducing poverty and inequality across the developing world. With commodity export-dependent economies since growing at less than half the rate of the boom years, amid rapidly growing populations, the number of people living in extreme poverty has increased in many countries. Today, commodity exporters are home to three-fifths of the extreme poor but slightly over one-fifth of the global population.

Resurgent raw materials prices are offering renewed hope for income growth in commodity exporters. Terms of trade across commodities are at their highest levels in two decades. Some see in these developments the dawn of a new commodity “super-cycle”, underpinned by growing economies, investments in mineral-heavy “green growth” and persistent supply-side constraints. Sceptics warn against making predictions based on a year of rally in commodity prices. Going forward, though some commodity producers may experience important financial windfalls from certain commodities, the moment presents itself as an opportunity to rebuild policy buffers and lay the groundwork for the structural reforms necessary for durable eradication of extreme poverty and sustainable development.

Find out more in the December Monthly Briefing on the World Economic Situation and Prospects.

Photo by Omid Roshan on Unsplash