Oil and commodity prices will start going up again when the global economy starts recovering from the current downturn, according to the latest UN Economic and Social Survey of Asia and the Pacific 2009.
“The reduction in commodity prices since the global economic downturn means that food and oil prices in particular have reduced significantly compared to the first half of 2008,” said the Deputy Director of the Institute of Policy Studies, Dr Dushni Weerakoon, speaking at the recent launch of the UN report.
“But the pressure on fuel and food prices is expected to increase again, when the global economy turns around. So the report recommends measures to reduce demand for oil and to focus on areas such as small hold agriculture,” said Dr Weerakoon. Now the UN is saying Asian countries are in for a bigger problem than just a global recession. According to the UN report three major global calamities are coming together to form a much bigger problem than a short-term global downturn.
“The Asian region is facing three global crises that are converging. These are the global financial crisis, the food and fuel price volatility, and climate change. These three factors are converging in the Asian region,” said Dr Weerakoon.
Governments are advised to keep in mind the nature of the converging crises when making policy decisions.
As far as the global recession is concerned, Sri Lanka’s low foreign reserves and already large budget deficit, is seen to limit the government’s ability to counter the impacts of the global downturn. Sri Lanka’s lowering external reserves for instance, is seen as a “critical concern.”
“A critical concern for Sri Lanka is the means of financing the external balance. The gross official reserves were US$ 1.4 billion in January. In the context of these tight finances options for a stimulus package are limited,” said Dr Weerakoon.
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