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 News | August 21, 2008 |
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Inflation not credit main woe for Asia
SHARP INCREASES in the price of basic items like food and fuel will likely have a much greater impact on Asia than the credit tightening and economic slowdown affecting other parts of the world, according to the Australian Government’s export credit agency.
The latest World Risk Developments report from Export Finance and Insurance Corporation suggests Asia will probably remain a relatively high growth region.
According to EFIC chief economist Roger Donnelly, most economic analysts broadly agree with the World Bank that growth in the developing countries of East Asia could fall by around 1.5 per cent to about 8.5 per cent in aggregate, while China could slow by 2 per cent to around 9.5 per cent.
“In other words, the slowest growth since 2002, but still high compared with growth in other regions,” he said.
“The biggest risk to this growth comes from rising food and fuel prices, not the global credit squeeze or slowing exports,” Mr Donnelly said.
Until recently, he said, most central banks were waiting to see if the food and fuel price increases would be one-off jumps, rather than escalating trends that would require official interest rate increases.
“But in just the past few weeks, the Indonesian, Philippine and Vietnamese central banks have raised interest rates in an effort to prevent dearer food and fuel triggering an inflation breakout.”
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19 June 2008
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