Responding to High Commodity Prices

Abstract

The recent commodity price boom resulted from rising demand in the face of a long period of low supply growth and market distortions. Structural factors are expected to return international commodity prices to relatively high levels as the global economy recovers. The Asian and Pacific economies and the region's poor will be among the most exposed to a rebound in prices. The recent response to high commodity prices can be improved upon. At the global level, the priority for Asian and Pacific governments is to seek a commitment to lessening distortions favouring bio-fuels. At the regional level, there is a need to address the use of trade restrictions on food commodities in Asia, notably rice. At a national level, the long-term neglect of the rural economy warrants correction; and efforts to expand and make social safety nets more ‘market friendly’ are called for.