Amid the fallout from Russia’s invasion of Ukraine, the effects of climate change on agricultural yields, and elevated inflation, global food prices soared over the past year too, highlighting the rising risks to food security — which, in turn, represent a growing credit risk.
In a new report, Moody’s Investors Service said that global food security is likely to remain vulnerable to shocks, stemming from the growing global demand for food, increased climate risks, and the sector’s exposure to geopolitical disruptions.
These food security threats will also become a recurrent source of credit risk, it said, as food price shocks exacerbate macroeconomic challenges and social risks.
“Beyond their human and development costs, food crises have clear negative economic, external, fiscal and social repercussions,” the report said.
“Malnutrition and related difficulties have long-term effects on health, education, and ultimately productivity and human capital,” it said — adding that food price inflation can also negatively effect government finances.
“Food insecurity worsens social difficulties and can trigger social-political instability or violence,” the report also noted.
These risks are most significant in emerging and frontier markets, “where a higher share of food in household spending combines with other vulnerabilities, such as generally higher exposure to environmental and social risks,” it said.
In particular, markets in Africa, the Middle East, and parts of South Asia, will remain “most vulnerable to future food security crises,” the report noted.