Rising global food prices are causing grave concerns
Merle D. Kellerhals | Wednesday, 2 July 2008
THE Organization for Economic Cooperation and Development (OECD) has signaled that several more quarters of weak economic growth lie ahead for most of its 30 members, and weak economic growth in the United States is effectively dragging down its overall forecast.
The global economy has been buffeted by a combination of financial market turmoil, cooling housing markets, and sharply higher commodity prices, says Jorgen Elmeskov, acting head of the Paris-based OECD Economics Department. "The current economic situation is particularly unsettled and the distribution of risk ... is wide," he said in an economic forecast released last month.
"OECD economies have been hit by strong gales over the recent past and it will take time and well-judged policies to get back on course."
The report projects that the rate of growth of the gross domestic product (GDP) for OECD members will decline in 2008 to 1.8 per cent, from 2.7 per cent in 2007, and fall to 1.7 per cent in 2009. The GDP is the sum of all goods and services produced within a nation.
The US economy is projected to grow 1.2 per cent in 2008 and 1.1 per cent in 2009, the report says.
Inflation, which is a sustained increase in prices for commodities and services, in OECD countries will reach 3.0 per cent in 2008, but fall to 2.1 per cent in 2009. Rising inflation decreases the buying power of consumers, businesses and governments, thereby depressing national economies.
"Signs that inflation expectations could be drifting up also call for caution," Elmeskov said. Confidence in stable prices can be enhanced by various financial and economic measures, he said, but the ultimate confidence-enhancing measure is to actually rein in inflation.
And OECD unemployment will hit 5.7 per cent in 2008 and rise to 6 per cent in 2009, the report says.
The OECD noted that the United States has taken measures through temporary tax rebates to stimulate its economy "that seem to be appropriately timed and targeted and therefore stand a good chance of providing needed support to activity. The issue of fiscal stimulus has also been broached for other OECD regions, but, in general, the case for such initiatives is weak."
Elmeskov warned that "sharply higher energy prices and higher costs of capital as a result of financial market developments could sap potential growth."
OECD-FAO world food forecast: A combined forecast from the OECD and the UN Food and Agriculture Organization (FAO) late last May says world food prices are set to fall from current highs in coming years, but overall prices will nevertheless remain "substantially above" average price levels of the past decade.
"The dramatic increase in prices since 2005-2006 is partly the result of adverse weather conditions in major grain-producing regions in the world, with spill-over effects on crops and livestock that compete for the same land," the report says.
The poorest nations are most vulnerable, especially the urban poor in food-importing countries, and continued short-term humanitarian aid will be needed to prevent undernourishment and hunger, the report says. "For the least developed countries, especially the food-deficit group, the projections thus show greatly increased vulnerability and uncertain food supplies during an era of high commodity prices and high price volatility," the report says.
Fostering growth and development in poor countries is crucial, as is assistance in developing their agriculture supply base, the economic forecast says.
OECD Secretary-General Angel Gurria said, "The end of cheap food in a world where half the population lives with less than two dollars a day is a source of grave concern. We do not expect the current price levels to last. But the average of most agricultural commodity prices over the next 10 years will still exceed the average of the previous decade by 10 to 50 per cent, depending on the commodity."
FAO and OECD analysis indicates high oil prices, changing diets, urbanization, expanding populations, flawed trade policies, extreme weather, growth in biofuels production, and commodity speculation have pushed food prices higher worldwide. Rising food prices have unleashed protests and riots across the globe on fears that millions will suffer from hunger and malnutrition.
"Rising prices now translate, unfortunately, as an increase in hunger and civil strife," FAO Director-General Jacques Diouf said at a news conference with Gurria when the joint report was released.
The OECD is a forum where governments of 30 democracies with free-market economies work together to address the economic, social and environmental challenges of globalization.
By courtesy: The US Department of State's Bureau of International Information Programmes and released by the US Embassy in Dhaka
The global economy has been buffeted by a combination of financial market turmoil, cooling housing markets, and sharply higher commodity prices, says Jorgen Elmeskov, acting head of the Paris-based OECD Economics Department. "The current economic situation is particularly unsettled and the distribution of risk ... is wide," he said in an economic forecast released last month.
"OECD economies have been hit by strong gales over the recent past and it will take time and well-judged policies to get back on course."
The report projects that the rate of growth of the gross domestic product (GDP) for OECD members will decline in 2008 to 1.8 per cent, from 2.7 per cent in 2007, and fall to 1.7 per cent in 2009. The GDP is the sum of all goods and services produced within a nation.
The US economy is projected to grow 1.2 per cent in 2008 and 1.1 per cent in 2009, the report says.
Inflation, which is a sustained increase in prices for commodities and services, in OECD countries will reach 3.0 per cent in 2008, but fall to 2.1 per cent in 2009. Rising inflation decreases the buying power of consumers, businesses and governments, thereby depressing national economies.
"Signs that inflation expectations could be drifting up also call for caution," Elmeskov said. Confidence in stable prices can be enhanced by various financial and economic measures, he said, but the ultimate confidence-enhancing measure is to actually rein in inflation.
And OECD unemployment will hit 5.7 per cent in 2008 and rise to 6 per cent in 2009, the report says.
The OECD noted that the United States has taken measures through temporary tax rebates to stimulate its economy "that seem to be appropriately timed and targeted and therefore stand a good chance of providing needed support to activity. The issue of fiscal stimulus has also been broached for other OECD regions, but, in general, the case for such initiatives is weak."
Elmeskov warned that "sharply higher energy prices and higher costs of capital as a result of financial market developments could sap potential growth."
OECD-FAO world food forecast: A combined forecast from the OECD and the UN Food and Agriculture Organization (FAO) late last May says world food prices are set to fall from current highs in coming years, but overall prices will nevertheless remain "substantially above" average price levels of the past decade.
"The dramatic increase in prices since 2005-2006 is partly the result of adverse weather conditions in major grain-producing regions in the world, with spill-over effects on crops and livestock that compete for the same land," the report says.
The poorest nations are most vulnerable, especially the urban poor in food-importing countries, and continued short-term humanitarian aid will be needed to prevent undernourishment and hunger, the report says. "For the least developed countries, especially the food-deficit group, the projections thus show greatly increased vulnerability and uncertain food supplies during an era of high commodity prices and high price volatility," the report says.
Fostering growth and development in poor countries is crucial, as is assistance in developing their agriculture supply base, the economic forecast says.
OECD Secretary-General Angel Gurria said, "The end of cheap food in a world where half the population lives with less than two dollars a day is a source of grave concern. We do not expect the current price levels to last. But the average of most agricultural commodity prices over the next 10 years will still exceed the average of the previous decade by 10 to 50 per cent, depending on the commodity."
FAO and OECD analysis indicates high oil prices, changing diets, urbanization, expanding populations, flawed trade policies, extreme weather, growth in biofuels production, and commodity speculation have pushed food prices higher worldwide. Rising food prices have unleashed protests and riots across the globe on fears that millions will suffer from hunger and malnutrition.
"Rising prices now translate, unfortunately, as an increase in hunger and civil strife," FAO Director-General Jacques Diouf said at a news conference with Gurria when the joint report was released.
The OECD is a forum where governments of 30 democracies with free-market economies work together to address the economic, social and environmental challenges of globalization.
By courtesy: The US Department of State's Bureau of International Information Programmes and released by the US Embassy in Dhaka