The world economy faces its gravest threat since the oil shock of the 1970s due to soaring prices, South Korea's president said yesterday, underlining concern among global policy makers about inflation.
Finance ministers from the world's richest countries meeting in Japan at the weekend warned that soaring commodities prices could damage economic growth, but they didn't come up with any plans to calm financial markets or quell public protests over the rising cost of living.
"It's no overstatement to say the world is faced with the gravest crisis since the oil shock of the 1970s, with oil, food and raw materials prices skyrocketing," South Korean President Lee Myung-bak told an Asia-Europe finance ministers' meeting in his country. Inflation dominated the meeting.
Lee's remarks came as benchmark US corn prices jumped more than three per cent to a record high, though oil prices eased as Saudi Arabia, the world's biggest producer, prepared to raise production.
French Economy Minister Christine Lagarde said the world needs more clarity on the market mechanisms behind surging oil prices and France has asked the International Monetary Fund and the International Energy Agency to investigate the functioning of the market.
IMF Deputy Managing Director Takatoshi Kato said the message to policy makers was to ensure minimal second-round effects of elevated food and fuel prices. Second-round effects refer to price rises through an economy, such as demands by workers for higher wages.