Soaring food prices a threat across Asia as Saudi Arabia expresses concern over high oil prices

Soaring global food prices threaten to push tens of millions of Asians into extreme poverty and cut the region’s economic growth this year, the Asian Development Bank warned in a report, as Saudi Arabia expressed concerns over the impact of high oil prices on global economy.

Coupled with skyrocketing oil prices, the spike poses a serious setback for developing Asia after having rebounded rapidly and strongly from the 2008 global economic crisis, said chief ADB economist Rhee Changyong on Tuesday, according to Agence-France Press.

“Left unchecked, the food crisis will badly undermine recent gains in poverty reduction made in Asia,” Mr. Rhee said in a statement. He made his statement as the ADB prepares for its annual general meeting in Hanoi, Vietnam.

Domestic food inflation in developing Asian nations hit 10 percent at the start of this year, the report said, a rate the Manila-based institution said could push 64 million people into extreme poverty.

The report cited double-digit rises in the price of wheat, corn, sugar, edible oils, dairy products and meat at the start of the year.

If the 10-percent inflation persists for the rest of the year, as is likely in the next few months, economic growth in the region could be reduced by up to 1.5 percentage points, it added.

The report, according to AFP, warned factors at play during the 2007 to 2008 food crisis were also present now, as grain stocks fell.

These include rising demand for food from big, wealthier developing countries, competing uses for food grains, shrinking available agricultural land, and stagnant or declining crop yields, it said.

The report warned the price of rice, the staple cereal for 3.3 billion people in Asia, would likely keep rising as bad weather cut yields, prompting consumers to seek cheaper but less nutritious substitutes.

“To avert this looming crisis it is important for countries to refrain from imposing export bans on food items, while strengthening social safety nets,” Mr. Rhee said.

“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.

Top oil exporter Saudi Arabia, meanwhile, expressed concerns over high oil prices and their impact on the global economy, the chief executive of state oil firm Aramco said on Tuesday.

Oil prices recovered from early losses on Tuesday, with Brent crude trading up 16 cents at $123.82 a barrel at 1059 GMT. Aramco Chief Executive Khalid al-Falih’s comments at an industry event in South Korea had weighed on sentiment earlier, when prices fell amid a wider decline in commodities.

“We are not comfortable with oil prices where they are today...I am concerned about the impact it could have on the global economy,” Mr. Falih told an industry gathering in South Korea, according to Reuters.

Unrest in North Africa and the Middle East and strong demand growth in Asia have pushed oil prices to their highest levels since 2008, triggering concern among consumers costly oil would harm economic growth and crimp fuel demand.

Saudi Arabia is the only oil producer with significant spare capacity to meet large supply outages such as that experienced in Libya.

Riyadh boosted capacity to 12.5 million barrels per day (bpd) in 2009, just as the global economic downturn cut demand. This left it with a supply cushion of over 4 million bpd, more than twice the spare capacity it targets of 1.5 million bpd to 2 million bpd. Output stood at 8.292 million bpd in March, down from 9.125 million bpd in February.

(Abeer Tayel of Al Arabiya can be reached via email at: [email protected])