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Worst is yet to come for food inflation in Asia, Nomura warns

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People sell fish at a street market in a slum area in Tondo district in Manila on May 10, 2022. - The son of late Philippine dictator Ferdinand Marcos cemented a landslide presidential election victory on May 10, as Filipinos bet on a familiar dynasty to ease rampant poverty -- dismissing warnings the tarnished clan will deepen corruption and weaken democracy. (Photo by CHAIDEER MAHYUDDIN / AFP) (Photo by CHAIDEER MAHYUDDIN/AFP via Getty Images)
People sell fish at a street market in Tondo district in Manila. (Photo by CHAIDEER MAHYUDDIN / AFP)

By Claire Jiao

(Bloomberg) —Asia’s red-hot food prices will likely heat up further in the coming months, with Singapore, South Korea and the Philippines set to see the sharpest price increases, according to Nomura Holdings Inc.

Food prices in Asia ex-Japan rose 5.9% annually in May, from 2.7% in December, Nomura said in a report Monday. That rate should accelerate in the second half of the year given the roughly six-month lag between the movement of global food costs and their impacts in Asia. Issues like China’s pandemic lockdowns, Thailand’s swine fever outbreak and India’s heat wave add to woes.

“Consumers’ perception of inflation is strongly influenced by the prices of frequently purchased necessities, such as food, and can lead to higher inflation expectations,” it said, adding that Jakarta and Manila have already had to raise minimum wage levels to account for the higher cost of living.

People buy chicken meat at a market in Singapore's city centre on May 24, 2022. The Ministry of Trade and Industry MTI and Monetary Authority of Singapore MAS announced on Monday that the MAS core inflation on a year-on-year basis rose to 3.3 percent in April from 2.9 percent in the previous month.   Meanwhile, the CPI-All Items inflation remained unchanged at 5.4 percent year on year in April. (Photo by Then Chih Wey/Xinhua via Getty Images)
Chicken meat at a market in Singapore. (Photo by Then Chih Wey/Xinhua via Getty Images)

Inflation is already spreading beyond cereals and edible oils to other categories like meat, processed food and even dining out, Nomura said. Rice — so far kept stable by ample stocks — may be next if demand surges as nations seek alternatives to pricey wheat.

That’s flashing warning signs for large food importers like Singapore, which is expected to see food inflation double to 8.2% in the second half from 4.1% now. India will likely see the highest print at 9.1% due to rising feedstock costs, based on Nomura estimates.

While Asia’s central banks initially pledged to look through supply-side shocks, Nomura said looming second-round effects will trigger faster monetary policy normalization.

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