Surge in global inflation: Developing economies have been hit harder

[OKIsItJustMe]

http://www.dailytimes.com.pk/default.asp?page=2008%5C06%5C08%5Cstory_8-6-2008_pg5_4

Sunday, June 08, 2008

Surge in global inflation: Developing economies have been hit harder

ISLAMABAD: 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.

...

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.

[SergeyDovlatov]

1. As long as they don't inflate their currency they are ok.

However if they keep their currency pegged to a dollar, they are screwed. Since US is printing too many of them to fund the war.