UN Report: Asia Faces Jump in Food Costs

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 U.N. 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 U.S. 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 U.S. 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 U.S. 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 U.S. downturn and a depreciation of the dollar, the impact would be harsh."