High commodity prices, rising debts cast shadow at WEF meet

Subscribe to Oneindia News

Prakash Chawla

Davos, Jan 27 (PTI) Fears of rising commodity prices andbuilding of asset bubbles in emerging economies like India,China and Indonesia marked the deliberations on the second dayat the World Economic Forum (WEF).

Although no one was sure as to when the next crisis wouldhit the world, business leaders highlighted dangers facing theworld economy -- ranging from asset bubbles in emergingcountries to soaring world commodity prices to huge levels ofdebt in Europe.

As business leaders warned of the next global crisisfollowing the rise in sovereign debts in Europe, FrenchPresident Nicolas Sarkozy put up a brave front asserting that"[Germany�s] Chancellor Merkel and myself will never � do youhear me, never � let the euro fall."

Participating in a debate on whether the world is nowbetter prepare to face a future systemic shock, Maurice Levy,Chairman and CEO of Publicis Groupe, the internationaladvertising and communications company, said that he wasconcerned about surging asset prices in China and otherleading emerging markets.

The leap in the global commodity prices, which havealready triggered fears of political unrest in some developingcountries because of soaring food cost, is linked toincreasing urbanisation, the speakers said.

Among the emerging markets, India has already seen highfood inflation which soared to 18.32 per cent for the weekended December 25, 2010. It moderated to 15.57 per cent bymid-January, but is still too high for comfort.

The headline inflation in India has also increased to8.43 per cent in December 2010 prompting the RBI to raise keyinterest rates this week, the seventh time since last March.

Following spurt in crude oil prices in the internationalmarket, the oil companies in India recently raised the priceof petrol. The government has, however, refrained fromincreasing diesel prices as it would have cascading effect oninflation.

Addressing the gathering, Klaus Klein Feld, Chairman andCEO of Alcoa said that with rising demand for cars indeveloping countries will put pressure on steel and copperprices worldwide.

Indonesian President Susilo Bambang Yudhoyono also warnedthat the next economic war could be over scarce resources ifproblems of rising food prices, poverty and population growthremain unresolved.

Addressing participants at the WEF, Yudhoyono noted thatrecent increases in food and energy prices could still go up.

"High food prices have an impact on inflation and onpoverty and unrest, and could lead to social and politicalunrest," he said. .

Please Wait while comments are loading...