Asia can overcome food, fuel inflation - World Bank

By Vithoon Amorn

DANANG, Vietnam (Reuters) - The economies of East Asia are sound and should be able to weather a slowdown as well as inflationary pressures from the high price of rice and other commodities, a senior World Bank official said on Friday.

Global rice prices have been rising since October when India, which normally exports 4 million tonnes annually, banned exports of non-basmati rice.

Other major producing countries like China, Egypt and Vietnam have also curtailed exports of rice, the staple food of about half of the world's 6.6 billion people, threatening to drive prices even higher and heightening food security fears.

"High and rising food prices, especially rice prices, posed a special challenge," Juan Jose Daboub said in a statement at a two-day meeting of Asian finance ministers in Danang, Vietnam.

"Governments needed to take short-term steps to protect the poor, but also to ensure that long-term solutions were found to relieve shortages," said Daboub, a World Bank managing director and one of three deputies to its president, Robert Zoellick.

Inflation across the region was contributing to significant reductions in the incomes of the poor, who have to spend between one-third and two-thirds of their income on food, Daboub said.

However, he cautioned against adopting excessive state subsidies to deal with food inflation, saying that could seriously strain fiscal positions and distort markets.

Daboub's statement to the 10-nation ASEAN group on the global slowdown said the region was "positioned well to weather the downturn, thanks to sound economic management, strong growth and accumulated reserves over the past decade".

A World Bank report on Tuesday said Asia faced a tough job in managing inflation at a time when economic growth was slowing.

Rising food and fuel prices have helped drive inflation to a 26-year high in Singapore, a 14-month high in India and the highest in more than a decade in Hong Kong, China and Vietnam, which is hosting the Association of South East Asian Nations (ASEAN) meeting.

The Philippines, one of the world's biggest rice importers, has sought to buy large shipments from Vietnam and Thailand to replenish its dwindling stocks.

The government wants to have enough rice for 30 days of consumption before July, when the supply of local rice dwindles.