Food inflation in developing nations a concern: OECD-FAO

A joint OECD-FAO report released today said that food inflation is becoming a greater economic concern especially in many developing countries. High food prices can upset the fragile economic and political stability of those developing countries.

Fri, Jun 17, 2011

High food inflation is a concern for economic stability and food security in some developing countries as the purchasing power of the poor is reduced, a joint OECD-FAO report said on Friday.

However, inflation is expected to remain subdued in most parts of the world in the next decade despite increasing prices of commodities, it noted.

"... Recent evidence indicates that consumer food price inflation is currently rising in most countries, contributing to higher aggregate consumer price inflation. This raises concerns for economic stability and food insecurity in some developing countries as the purchasing power of poorer populations is reduced," the report by the Organisation for Economic Cooperation and Development (OECD) and Food and Agriculture Organisation (FAO) said.

The capacity of a country to grow or to buy food products at affordable prices constitutes a fundamental pre-condition for sustainable development and growth, it said.

"High and volatile food commodity prices can jeopardise the often fragile economic and political stability of some developing countries," it noted.

According to the report, the largest contribution of food prices to inflation was found in some Asian countries over the past 12 months.

The contribution of food prices to inflation was greater in emerging economies than in OECD countries because of the fact that food constitutes a larger share of the total consumption basket, it said.

The FAO index showed global food commodity prices touched their highest recorded level in February, 2011, it said.

The Organisation for Economic Cooperation and Development (OECD) is a 34-member grouping of mostly developed nations, including the US and Germany.

In the next ten years, the OECD-FAO report projected inflation in OECD countries would average around 2% per annum, while higher inflation rates, in the 4-8% range, are anticipated for high growth emerging economies.

During the January, 2010-January, 2011, period, three-quarters of the OECD countries experienced retail food price increases of 5% or less, while in six, they rose by over 5%, the report said.

In the same period, two countries -- Korea and Estonia -- experienced increases of over 10%. Furthermore, Brazil, China, Indonesia and the Russian Federation all experienced double-digit rates of food inflation during the review period.

Other developing and least developed countries showed a similar trend of accelerating food price inflation, it said.

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