IMF: rising commodity prices will challenge developing countries

Niveen Wahish, Monday 11 Apr 2011

Targeted subsidies are critical to overcoming the effect increases in food and fuel prices have on the poor

Olivier Blanchard, IMF Economic Counsellor and Director of Research said today at a press briefing launching the IMF’s April 2011 World Economic Outlook that “commodity prices have increased more than expected, reflecting a combination of strong demand growth and supply shocks.” Although he does not see this affecting growth in advanced economies, it is said that the challenge will be stronger for emerging and developing countries “where the consumption share of food and fuel is larger and the credibility of monetary policy is often weaker.”

“Food prices are within their 2008 peaks,” according to the World Economic Outlook.  “The overall IMF commodity price index rose by 32 per cent from the middle of 2010 to February 2011, recuperating about three quarters of the 55 per cent decline after the cyclical peak in July 2008 through early 2009.”

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