KUALA LUMPUR, July 19 (Bernama) -- Food security has become a major concern for governments in the Asia Pacific (APAC) as the Russia-Ukraine military conflict continues to disrupt supply and raise the cost of agricultural products, according to a new report by Moody’s Investors Service.
The report said food shocks could increase social discontent and trade protectionism, while policy responses to recent shocks will have long-term credit implications for sovereigns and some corporates.
Governments, including India, Indonesia, Malaysia and Thailand, use administered prices for food, fuel and other basic commodities.
“Compensating for domestic food price increases will entail fiscal costs for governments or state-owned commodity companies. The pace of fiscal consolidation in some of these economies is likely to slow as spending pressures persist,” it said.
Moody’s said the economic slowdown and job and income losses over the past two years have also disproportionately affected vulnerable countries and communities, rendering them more susceptible to higher commodity prices.
“Despite rapid economic growth, Asia remains home to most of the world's undernourished population,” it said.
The Russia-Ukraine military conflict is also taking place against a backdrop of wavering international policy coordination.
Intensified social risks and pressures to adopt a more protectionist stance will likely increase, with some producers in APAC imposing export restrictions.
For example, India continues to restrict exports of wheat and sugar, Malaysia has only partially eased its current ban on chicken exports and Indonesia imposed a temporary ban on palm oil exports.
Moody’s said export restrictions will exacerbate existing food security challenges and will be credit negative not only for food importers but also for affected food exporters in countries imposing the restrictions.
“There will be negative effects for logistics and port facilities if throughput at ports declines because of export restrictions. Supply shortages will negatively affect food packaging companies and distributors.
“However, we expect rated companies in affected infrastructure and food consumer products sectors, which are largely investment grade entities, to be able to maintain access to funding,” it said.
For governments, it said many of which have less fiscal space post-pandemic, compensating for domestic food price increases will entail fiscal costs and the pace of fiscal consolidation will likely slow as spending pressures persist.
Amid mounting social pressures, food and agricultural subsidies will feature more prominently.
“Targeted subsidies to consumers can be effective in achieving growth and equity objectives, while agricultural subsidies to producers will play an important role in food security and political stability in agricultural employment,” Moody’s added.
-- BERNAMA
BERNAMA provides up-to-date authentic and comprehensive news and information which are disseminated via BERNAMA Wires; www.bernama.com; BERNAMA TV on Astro 502, unifi TV 631 and MYTV 121 IFLIX channels and BERNAMA Radio on FM93.9 (Klang Valley), FM107.5 (Johor Bahru), FM107.9 (Kota Kinabalu) and FM100.9 (Kuching) frequencies.
Follow us on social media :
Facebook : @bernamaofficial, @bernamatv, @bernamaradio
Twitter : @bernama.com, @BernamaTV, @bernamaradio
Instagram : @bernamaofficial, @bernamatvofficial, @bernamaradioofficial
TikTok : @bernamaofficial
© 2024 BERNAMA • Disclaimer • Privacy Policy • Security Policy