Asian prospects weighed down by oil, food prices
Monday, 17 March 2008
SINGAPORE, March 16 (AFP): Runaway oil prices, rocketing food costs and a feeble US economy will hurt Asia- Pacific economic growth prospects this year and create social problems especially among the poor, analysts said.
Oil touched unchartered territory at 111.00 dollars a barrel last week, and analysts said they expect prices to boil further.
The recent oil price rise, a slowing US economy, global financial market turmoil and escalating inflation make for a powerful combination that could hobble export-oriented Asia's economic growth in 2008, economists said.
Compared with the oil shocks in the 1970s and 1980s, the current price rise comes against the backdrop of a sharp slowdown in the United States, noted Cyn-Young Park, an economist with the Asian Development Bank (ADB) in Manila.
Inflation, driven by soaring energy and food costs, is also complicating the problem because it limits the room for manoeuvre among policy- makers, she said.
Moves to re-introduce subsidies to help the poor are likely to backfire because they will erode state coffers, she added.
Singapore, Southeast Asia's most advanced economy, has already downgraded its growth forecast for this year.
Gross domestic product (GDP), the value of all goods and services produced in the country, is now expected to expand at a rate of 4.0-6.0 per cent instead of 4.5-6.5 per cent, the trade ministry said.
GDP climbed 7.7 per cent in 2007 and 8.2 per cent in 2006.
ANZ chief economist Saul Eslake said Australia not only faced soaring fuel costs and the global credit crunch but also rising interest rates, which would reduce domestic demand and slow economic growth.
Park, the ADB economist, said many Asian governments are caught in a dilemma because in order to help the poor cope with rising living costs, they would have to backtrack on efforts to remove costly state subsidies. Re-introducing subsidies could untangle fiscal reforms instituted in the wake of the Asian financial crisis in 1997- 1998, Park said, adding that they can only be effective if the rise in oil prices is short-term.
Oil touched unchartered territory at 111.00 dollars a barrel last week, and analysts said they expect prices to boil further.
The recent oil price rise, a slowing US economy, global financial market turmoil and escalating inflation make for a powerful combination that could hobble export-oriented Asia's economic growth in 2008, economists said.
Compared with the oil shocks in the 1970s and 1980s, the current price rise comes against the backdrop of a sharp slowdown in the United States, noted Cyn-Young Park, an economist with the Asian Development Bank (ADB) in Manila.
Inflation, driven by soaring energy and food costs, is also complicating the problem because it limits the room for manoeuvre among policy- makers, she said.
Moves to re-introduce subsidies to help the poor are likely to backfire because they will erode state coffers, she added.
Singapore, Southeast Asia's most advanced economy, has already downgraded its growth forecast for this year.
Gross domestic product (GDP), the value of all goods and services produced in the country, is now expected to expand at a rate of 4.0-6.0 per cent instead of 4.5-6.5 per cent, the trade ministry said.
GDP climbed 7.7 per cent in 2007 and 8.2 per cent in 2006.
ANZ chief economist Saul Eslake said Australia not only faced soaring fuel costs and the global credit crunch but also rising interest rates, which would reduce domestic demand and slow economic growth.
Park, the ADB economist, said many Asian governments are caught in a dilemma because in order to help the poor cope with rising living costs, they would have to backtrack on efforts to remove costly state subsidies. Re-introducing subsidies could untangle fiscal reforms instituted in the wake of the Asian financial crisis in 1997- 1998, Park said, adding that they can only be effective if the rise in oil prices is short-term.