TOKYO (Reuters) - Asian countries are taking steps to tame inflationary pressures from a spike in food costs but factors beyond their control such as huge capital inflows make it no easy task, a senior World Bank official said.
While higher food prices will not significantly hurt economic growth in East Asia, inflationary pressure will be sustained due to growing food demand in emerging nations and volatile weather, said John Roome, the World Bank’s director of sustainable development in the East Asia and Pacific region.
“Our sense is that countries are aware of the issues. They are taking steps to manage the inflationary pressures. But they are trying to balance other issues at the same time,” such as the need to sustain solid economic growth, Roome said in an interview with Reuters on Wednesday.
Huge inflows of capital from other parts of the globe have also complicated efforts by Asian central banks to curb inflation.
“If that’s happening, their flexibility in terms of how they respond is clearly a bit more limited than it might be in other circumstances,” he said.
Asia has faced some of the highest food inflation in the world, prompting some central banks in the region such as those in India, South Korea and China to tighten monetary policy.
Chinese inflation was lower than expected at 4.9 percent in the year to January, but price pressures continued to build and could force the country’s central bank to stick to its course of monetary tightening.
Taming volatility in commodity and food prices is expected to be among the key topics for debate when Group of 20 finance leaders gather in Paris this weekend.
World Bank chief Robert Zoellick said on Tuesday that global food prices have reached “dangerous levels” and warned that their impact could complicate fragile political and social conditions in the Middle East and Central Asia.
An estimate by the Washington-based poverty-fighting body showed higher food prices — mainly for wheat, maize, sugars and edible oils — have pushed 44 million more people in developing countries into extreme poverty since June 2010.
The impact has been somewhat mitigated in Asia by the fact that increases in global prices of rice, the region’s staple food, have been less than rises in other commodity costs.
Still, the effect will be felt most by the vulnerable and the poor, Roome said, stressing the need for increased global efforts to create social safety nets and boost agricultural productivity.
“One thing that we feel is important is to keep this question of agricultural productivity, particularly in a climate changing world, front and centre of the global debate in a forum like G20, so we can ensure that adequate attention and resources are paid to addressing these issues now,” Roome said.
Increased information sharing as well as voluntary restraint by governments, so they refrained from trying to shield themselves from the impact of food inflation with export bans and pre emptive huge imports of food, would also help tame volatility in commodity and food prices, he said.
Roome is visiting Tokyo as part of a World Bank delegation for annual policy discussions with the Japanese government.
(Editing by Michael Watson)