UN Report: Asia Faces Jump in Food Costs

Economic growth in the region will slow as the U.S. credit crisis hurts demand for exports, but a robust expansion in China and India should help Asia avoid a major slump, the U.N. 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 towards 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.