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The World Bank slashed its outlook for oil and metals prices on Thursday because of the economic fallout of the coronavirus pandemic and said the commodity market shock could hit developing countries hardest.

Crude oil prices are expected to average US$35 a barrel this year, down 43 per cent from the average in 2019, the World Bank said, marking a sharp downward revision from its October forecast.

“The downward revision reflects an historically large drop in demand,” the World Bank said in a press release. It said overproduction from OPEC and other major world oil producers was exacerbating the price decline.

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Metals prices, meanwhile, are seen dropping 13 per cent overall this year, the World Bank said. But gold, a traditional safe-haven investment, is seen up nearly 15 per cent.

It added that the impact of the health crisis on agricultural commodity prices is expected to be moderate, but that supply chain disruptions could raise the food security risk in some places.

“This enormous shock to commodity markets and low oil prices could deliver a serious setback to developing economies,” said Makhtar Diop, World Bank vice-president for infrastructure, in the press release.

The organization recommended that world governments reform energy subsidy programs to free up funds for emergency coronavirus response, and advised against the use of tariffs or other trade protections to shield domestic industries.

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