Soaring food prices threaten Asian growth

By Mike Stones

- Last updated on GMT

The Asian Development Bank is based in Manila, capital of the Philippines.
The Asian Development Bank is based in Manila, capital of the Philippines.

Related tags Poverty

Rapidly rising food and oil prices threaten to reverse economic growth and push millions into extreme poverty, warns a report from the Asian Development Bank (ADB).

The Manila-based bank warned that regional growth could be reduced by up to 1.5 per cent if food and oil prices continue to rise throughout this year.

Changyong Rhee, ADB chief economist, said: "For poor families in developing Asia, who already spend more than 60% of their income on food, higher food prices further reduce their ability to pay for medical care and their children's education​."

Domestic food inflation has averaged 10 per cent this year in many Asian countries. That has pushed an additional 64m people into extreme poverty, defined as living on less than $1.25 a day.

Export bans

To avert the crisis, Rhee recommended that countries resisted the temptation to impose export bans on food and strengthened social safety nets. "Efforts to stabilize food production should take center stage, with greater investments in agricultural infrastructure to increase crop production and expand storage facilities, to better ensure grain produce is not wasted,” ​he said.

The report also advises action to combat food price speculation. It recommends improving market integration, and eliminating policies which impede the transfer of food from surplus to deficit regions.

Improved cooperation between Asian countries can further secure the region’s food supplies. “The ASEAN Integrated Food Security Framework, under which the 10 member ASEAN group of countries has agreed to establish an emergency regional rice reserve system, is a positive step in that direction​,” according to the report.

In the short term, the pattern of higher and more volatile food prices is likely to continue, continues the report.

Less costly

Rice prices are likely to continue their uptrend as the effects of La Niña weather system persist, prompting consumers to seek less costly and less nutritious substitutes.

Grain stocks have fallen and there is rising demand for food from more populous and wealthier developing countries, competing uses for food grains, shrinking available agricultural land, and stagnant or declining crop yields.

Other factors driving high prices are identified as production shortfalls caused by bad weather along with the weak US dollar, high oil prices and subsequent export bans by several key food producing countries since last June.

The result has been double digit increases seen in the price of wheat, corn, sugar, edible oils, dairy products and meat, the report notes.

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