Bank Warns of Effects of Rising Food Prices on Asia
THOMAS FULLER
BANGKOK — Sharp rises in food prices are a threat to economic growth in Asia and could push millions of people into extreme poverty, the Asian Development Bank said in a report to be released on Tuesday. Food prices in Asia have increased an average of about 10 percent so far this year, which the bank calculates could force 64 million people below the poverty income threshold of $1.25 per person a day if prices remain at current levels. “Whenever we say that Asia’s growth rate is booming and Asia is a new global growth center, people misunderstand the point,” said Changyong Rhee, the chief economist of the bank, which is supported by governments and helps finance infrastructure projects around the region, among other activities. “Asia is home to two-thirds of the world’s poor. There is still a long way to go.” Asia is a major contributor to global inflation and is vulnerable to its effects. Growth in China and India is blamed for pushing up prices of many commodities. The region’s population density and uneven income distribution make people there especially susceptible to spikes in food prices, Mr. Rhee said. The poor in Asia typically spend about two-thirds of their income on food. A continued rise in prices for food and fuel could leave Asia’s consumers with less disposable income to spend on electronics, clothing and other products. Inflation could also spur central banks to further raise interest rates. Taken together, this could slow down economic growth by as much as 1.5 percentage points this year, the development bank has calculated. Much depends on whether prices continue to climb. On Monday, Barclays Capital, a securities firm, reported that food prices in Vietnam, one of the countries worst hit by inflation, rose 24 percent over the last 12 months, the fastest pace in more than two years. But Prakriti Sofat, the analyst at Barclays who wrote the firm’s report, predicted that prices in Vietnam, especially for rice, would fall in the coming months as farmers who were hoping for even higher prices sold off their stocks with the arrival of a new harvest. “We believe rice prices should taper off as the spring harvest begins in May,” Ms. Sofat said. Mr. Rhee of the Asian Development Bank also expects a moderation in food prices later this year, but he fears it could lull governments into inaction. “It’s time for us to talk about long-term investments in food to make sure this problem is not recurring,” he said. Poor countries that are net food importers are the most vulnerable to the increases, Mr. Rhee said, citing Bangladesh, the Philippines, India and Sri Lanka. In theory, the winners from higher food prices in Asia are countries like Thailand, a major food exporter. Indeed, the countryside in Thailand has shown some signs of vitality. Car dealerships in regions heavy with plantations have reported sharp increases in sales as a result of rising prices of palm oil and rubber. Sales of pickup trucks nationwide were up 25 percent in March from a year earlier. But farmers were also being hit by the rising price of oil, both for fertilizers made from petroleum products and fuel for their machinery.