'Inflation, not growth, is Asia's biggest risk'
Making ends meet: Victor Angelo Cortez, a craftsman who makes rubber stamps by hand, works at his sidewalk stall in Manila. The craftsman, who previously earned 500 pesos a day, now sees his earnings cut by 20 per cent due to high costs of commodities. Picture: AFP
Saturday, September 13, 2008
INFLATION rather than an economic slowdown is the greatest risk and biggest policy challenge for developing countries in Asia, the head of the Asian Development Bank said yesterday.
The Manila-based agency plans to slightly cut its 2008 average growth forecast for developing Asia, which excludes Japan, Australia and New Zealand, while boosting its forecasts for inflation.
"While global growth is rapidly slowing, the slowdown in emerging economies in Asia has been relatively modest. On the other hand, inflation is accelerating rapidly," ADB president Haruhiko Kuroda said in an interview.
Its 2008 average growth forecast for developing Asia will drop slightly from its current projection of 7.6 per cent while its 2009 estimate will likely fall to around 7 per cent, down from 7.8 per cent.
It will revise up its inflation forecast for developing Asia to around 7-7.5 per cent this year from 5.1 per cent.
The ADB will issue updated growth and inflation forecasts on Tuesday. Its current estimates were made in April.
Kuroda said he hoped inflation would slow to around 5 per cent next year but uncertainty remained over commodity prices and monetary tightening measures in some countries.
"Inflation is the greatest risk in emerging economies in Asia," Kuroda said, adding that while it has peaked in China, South Korea and Thailand, it is accelerating in countries like Vietnam and Pakistan.
"Rather than supporting economic growth, the biggest policy challenge is tackling inflation."
Kuroda said that while China's economy was slowing, it would still mark high growth of around 10 per cent this year and next year, in line with current ADB estimates.
Exports from the world's fourth-largest economy will eventually slow given the strains in the global economy, but for the time being there was no need for Beijing to carry out large-scale fiscal stimulus or loosen monetary policy, he said.
China's economic slowdown from last year and stabilising prices meant it was hard to say whether the Chinese yuan should appreciate more rapidly right now, he added.
"The important thing is that the yuan steadily appreciates as a trend."
Kuroda also said he did not see a crisis developing in South Korea. There have been some concerns in financial markets about a potential capital flight out of the country.
"It is true that the South Korean economy has been weakening as growth in the United States, Europe and Japan is slowing rapidly, but I don't think that will invite financial system worries or a currency crisis there."
He said he was not concerned that South Korea's foreign reserves of more than US$240 billion may be shrinking fast due to intervention to support the won. "The size is huge relative to its economy, so there is no need to worry at all."Reuters
The Manila-based agency plans to slightly cut its 2008 average growth forecast for developing Asia, which excludes Japan, Australia and New Zealand, while boosting its forecasts for inflation.
"While global growth is rapidly slowing, the slowdown in emerging economies in Asia has been relatively modest. On the other hand, inflation is accelerating rapidly," ADB president Haruhiko Kuroda said in an interview.
Its 2008 average growth forecast for developing Asia will drop slightly from its current projection of 7.6 per cent while its 2009 estimate will likely fall to around 7 per cent, down from 7.8 per cent.
It will revise up its inflation forecast for developing Asia to around 7-7.5 per cent this year from 5.1 per cent.
The ADB will issue updated growth and inflation forecasts on Tuesday. Its current estimates were made in April.
Kuroda said he hoped inflation would slow to around 5 per cent next year but uncertainty remained over commodity prices and monetary tightening measures in some countries.
"Inflation is the greatest risk in emerging economies in Asia," Kuroda said, adding that while it has peaked in China, South Korea and Thailand, it is accelerating in countries like Vietnam and Pakistan.
"Rather than supporting economic growth, the biggest policy challenge is tackling inflation."
Kuroda said that while China's economy was slowing, it would still mark high growth of around 10 per cent this year and next year, in line with current ADB estimates.
Exports from the world's fourth-largest economy will eventually slow given the strains in the global economy, but for the time being there was no need for Beijing to carry out large-scale fiscal stimulus or loosen monetary policy, he said.
China's economic slowdown from last year and stabilising prices meant it was hard to say whether the Chinese yuan should appreciate more rapidly right now, he added.
"The important thing is that the yuan steadily appreciates as a trend."
Kuroda also said he did not see a crisis developing in South Korea. There have been some concerns in financial markets about a potential capital flight out of the country.
"It is true that the South Korean economy has been weakening as growth in the United States, Europe and Japan is slowing rapidly, but I don't think that will invite financial system worries or a currency crisis there."
He said he was not concerned that South Korea's foreign reserves of more than US$240 billion may be shrinking fast due to intervention to support the won. "The size is huge relative to its economy, so there is no need to worry at all."Reuters
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