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February 9, 2023
BUSINESS

Global lenders see higher food prices, but no crisis yet

Global financial lenders are advising countries to prepare for the possibility of higher food bills in the coming months, but for the moment the International Mone­tary Fund and World Bank see few signs of a widespread food price crisis like in 2007 – 2008, Mediafax informs, quoting Reuters. The worst drought in half a century in the United States and poor crops from the Black Sea bread basket have lifted prices of corn, wheat and soybeans. The price of rice – a staple food in Asia and parts of Africa – has so far been unaffected. “We are not saying that we anticipate a major crisis at this point,” said Juergen Voegele, director of the World Bank’s Agriculture and Rural Development De­part­ment. “The world has enough food, but of course we cannot predict the weather and if something extraordinary happens we might find ourselves in a difficult situation again.” World Bank data shows that overall food costs are higher but not yet at record levels of 2007 – 2008, which pushed millions into poverty as food prices rose across the board in tan­dem with sky-rocketing oil prices. The effects of the twin crisis in 2008 dissipated as the global fi­nan­cial crisis intensified and demand slowed. “Our recom­menda­tion is that countries prepare very early on,” Voegele said. “As long as our food stocks are so low (price) volatility will not go away easily. “The latest run-up in grain prices comes at a time when the world economy is slowing, the euro zone is in turmoil and unemployment is higher almost everywhere. The danger for poor countries is that their fiscal firepower was eroded by the global financial crisis and their ability to deal with bigger food import bills will be limited. The U.N. Food and Agriculture Organization’s food index jumped 6 percent in July to higher than in 2008, and the Food and Agriculture Organization warned against the kind of export bans, tariffs and buying binges that worsened the price surge four years ago.
Andrew Burns, a World Bank lead economist, said while higher food prices are not likely to contribute to a further slowing of the world economy, it is an added concern for consumers. “This is another source of insecurity, it is another source of worry for people,” Burns said. “If the situation were to become more sharply defined, if we were to see oil prices start to rise again as well, then that could very well cause that kind of pulling back from activity we have observed in the past with a significant knock-on effect on global activity.” Thomas Helbling, a division chief in the IMF’s Research Department, described the current rise in grain prices as a “classical supply shock.” “If this is truly a classical supply shock, prices will spike and if the next harvest is more back to trend, or back to normal, food prices will come down,” he said. “Still, there is a temporary reduction in real incomes, especially in emerging and developing economies, and that is not helpful to the extent that the global economy is carried by emerging economies and higher food prices will feed into domestic food prices even if it is a limited pass-through.”

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