Asia faces a sharp rise in food costs, due partly to surging demand for crops used in biofuels, and governments should do more to shield the region's poor from economic shocks, a UN commission said Thursday. Economic growth in the region will slow as the US credit crisis hurts demand for exports, but a robust expansion in China and India should help Asia avoid a major slump, the UN Economic and Social Commission for Asia and the Pacific said in a report. “Rapidly rising food prices will be the key challenge in the coming year,” Shuvojit Banerjee, an economist for the commission, said at a Beijing news conference. “With the march toward biofuels apparently unstoppable, the region has to prepare for sustained inflation through higher food prices.” Economic output for the sprawling region, which stretches from Japan to Georgia, should grow by 7.7 percent, down from 8.2 percent in 2007, the commission said. It said inflation should ease to 4.6 percent, down from 5.1 percent last year, though price rises in countries such as China will be higher. In China, food costs in February were up 23.3 percent from the same month last year, driven by a 63.4 percent jump in the price of pork and a 46 percent rise for vegetables. Across the region, price rises are driven in part by surging demand for food crops to make biofuels, such as sugarcane used for ethanol, the commission said. “We do view biofuels as quite a worry for food production in the region,” Banerjee said. China has banned use of food crops for fuel and has imposed curbs on grain exports to increase domestic supplies and cool inflation. Banerjee appealed to other governments to follow Beijing's example. “We would advise governments to be very cautious about biofuels” until the region can take advantage of technology being developed to make fuel from non-food crops, he said. On Wednesday, Indian Finance Minister P. Chidambaram said the use of food crops for biofuels is hurting the poor and called it “a sign of lopsided priorities of certain countries.» «It is outrageous and it must be condemned,” he said in a lecture in Singapore. The UN report said rising food costs hurt the poor much more than higher oil prices because they spend a much bigger share of their incomes to feed their families. In the Philippines, for example, 50 percent of consumer spending is for food versus 7 percent for energy. The commission's growth forecast is in line with those of economists who expect a US slowdown to depress Asia's rate of expansion but say rising demand from the region's own consumers, especially in China, should help to fill the gap. The full impact of the credit crisis triggered by a spike in defaults on subprime mortgages in the United States is still to be seen, Banerjee said. “We cannot rule out a significant slowdown in the US and further financial turmoil,” he said. However, he said “the good news is that China and India, the region's growth locomotives, are expected to grow at a robust pace, boosting the rest of the region.” China has set a growth target of 8 percent this year, down from last year's 11.4 percent. The region, and especially higher-technology exporters such as South Korea and Taiwan, could suffer a bigger hit if the US economy slows further and the weak dollar falls against Asian currencies, Banerjee said. “Countries in the region will face twin blows - lower demand and loss of competitiveness,” he said. “In a worst case scenario of a US downturn and a depreciation of the dollar, the impact would be harsh.” The commission appealed to Asian governments to do more to protect the poor by expanding social welfare and health care programs. Banerjee cited the examples of Thailand's universal medical care system and a food-for-work program in Bangladesh. “Extending protection to the majority of citizens is a critical priority,” he said. “This means that benefits should be ensured for the most vulnerable workers - the young, women, less-educated and less-experience.” The commission appealed for more efforts to improve productivity of Asian farming, where it said government neglect has contributed to keeping hundreds of millions of people in poverty. Agriculture employs 60 percent of Asia's workers, according to the commission. “We find persistent poverty and widening economic inequalities due to the neglect of agriculture,” Banerjee said. “Improving agricultural productivity would have a profound impact on poverty.” __
