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Surge in global inflation: Developing
economies have been hit harder
The surge in
the global inflation has affected developing economies more than the developed
economies, because the share of food in the consumption baskets of developing
economies is significantly higher than developed countries.
According to SBP sources, a number of factors are continuing to stoke up global
inflationary pressures and notably, these factors are: sustained increase in
global commodity demand, supply issues, and growing interest of investors in
commodity markets on the back of a weak dollar and falling interest rates.
Prices of all key commodities have witnessed significant growth since July 2007,
they said.
While increase in the prices of many key food commodities such as rice, wheat,
and edible oil is mainly due to relatively disappointing harvests (which could
improve in succeeding years), a significant contribution is also by factors that
may not change. The latter include the increased demand from emerging economies
(as income levels improve) and increased use of bio-fuel as an alternative
energy source, they said.
They added that link of food prices with energy cost, is particularly troubling,
given that energy prices are likely to remain significantly above historical
norms in the foreseeable future. Moreover, they said the greater use of
processed food in developed economies means that the impact of a rise in
commodity prices is muted in food inflation for these economies, as commodity
prices account for only a small share of the prices of processed foods, many
processed food industries either have long-term supply contracts, or hedge their
price risk, they remarked. app
Ref link:
http://www.dailytimes.com.pk/default.asp?page=2008/06/08/story_8-6-2008_pg5_4
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