Food prices threaten Asian economy: ADB

Soaring food prices could become a highly sensitive economic and
political issue in Asia despite its robust growth, the president of
the Asian Development Bank warned on Monday.

Haruhiko Kuroda said the explosion in food prices posed a threat to
macroeconomic stability and raised the cost of food subsidies and
current account deficits in food-importing countries.

"Food prices can become a very sensitive economic and political
issue," he told an Asia-Europe Meeting (ASEM) of finance ministers,
calling for safety nets to help the poor, reforms to agriculture and
measures to increase productivity.

Despite relatively robust growth, he said, Asia faces downside risks
-- a sharper than expected US slowdown, an escalation in global
financial instability and soaring energy and food prices.

Kuroda said the cost of food and energy may be the "most important
risk at the moment," posing policy challenges.

"Many countries face a growing dilemma on monetary policy: how to
gauge the right mix to control rising inflation without excessively
slowing economic growth," he said.

If Asian countries raise interest rates, the wider gap with the US may
attract "volatile portfolio investments" and fuel asset-price
inflation with an increased risk of a hard landing.

"But the risk would be even greater if prices spiral out of control,
feeding higher inflation expectations."

Kuroda said high oil prices could have a more visible impact on
domestic consumption and growth in Asia this year and next.

The meeting in the South Korean resort island of Jeju is being
attended by finance ministers or their deputies from 27 EU countries
and 16 Asian nations, plus officials from six international
organisations.