2008-09-16
Commodity Online
MANILA : Asian Development Bank (ADB) on Tuesday warned that turbulence on global markets fans inflation and that would slow Asian growth this year.
Governments in the region will need to address inflation even if it means slower economic growth, the Manila-based lender said in an update to its 2008 Development Outlook report.
The report was written before a weekend of financial market turmoil in the United States that has already had global repercussions, after Lehman Brothers filed for bankruptcy and Merrill Lynch was only saved with a takeover by Bank of America.
In its report the ADB said the past eight months of turmoil in the markets had "exploded the myth of uncoupling" and showed economies in Asia were still heavily reliant on industrial countries, notably the United States, for their exports.
Around 85 per cent of footwear imported by the United States and a third of its clothing comes from developing Asia, the bank said.
The ADB sharply increased its inflation forecast for Asia for 2008 from the 5.1 per cent predicted in April to 7.8 per cent, and to 6.0 per cent in 2009.
Economic growth in 2008 is expected to drop from the 7.6 per cent that was forecast in April to 7.5 per cent, and slow further to 7.2 per cent next year.
The ADB said it expected food prices would remain high, and that oil would remain "well above" US$100 a barrel - although New York's main contract, light sweet crude for October delivery, was at just below US$93 Tuesday.
China's economic growth will remain unchanged at 10 per cent this year, the ADB forecast, but it revised down slightly its 2009 forecast to 9.5 per cent on the expectation of a reduced trade surplus and slower investment growth.
The ADB said that while some central banks had started to tighten monetary policy, "some may have let the inflation genie out of the bottle by doing too little, too late, since interest rates in most countries are still lower than inflation."
"Containing inflation will take time as monetary policy works with a lag," the bank said.
The ADB projected double-digit inflation this year for Cambodia, Indonesia, Laos, Philippines, and Vietnam.
"Curbing inflation is the crucial macroeconomic challenge facing most Southeast Asian countries," the bank said.
The ADB also warned that the high prices of food worldwide are not likely to fall any time soon, and that there are no quick solutions to the problem.
"Scarcity is back, hunger is growing, and rapid economic growth is threatened. These are difficult times," the Manila-based lender said in the update of its annual Asian Development Outlook.
"In view of these difficulties, it seems unlikely that basic food prices will return to their real long-run downward trend."
The regional lender did note that food prices were "substantially below the peaks of the previous world food crisis in 1973-74."
But it said this time, price increases had been "sharp and disruptive," affecting the poorest people and food-importing countries the most, increasing inflationary pressure and threatening economic growth.
Studies blamed the high prices on various causes including population growth, a slowdown in agricultural production, the depreciation of the US dollar, high oil prices and the increased demand for biofuels, the ADB said.
Short-term speculation had also fed the price increases, it said.
The bank said even when the panic and speculation subsides, the ew "equilibrium price" for rice is likely to be 50-60 per cent higher than it was in 2007.
"Other basic food commodities are likely to exhibit similar patterns," the ADB added.
To make matters worse, the cost of inputs like fuel and fertilizer are now higher and rising rapidly, the ADB said.
The Asian financial group went on to warn regional governments not to become complacent after recent record increases in crude oil prices, saying the days of cheap oil were over.
Oil prices have fallen more than a third in value from their record levels of above US$147 in July.
Despite that, the Manila-based bank said in its update to its 2008 Asian Development Outlook that high oil prices were here to stay along with periods where the price would be volatile.
It said it expected the world would have to adjust to the price of oil at US$100 or more a barrel.
Governments in the region will need to address inflation even if it means slower economic growth, the Manila-based lender said in an update to its 2008 Development Outlook report.
The report was written before a weekend of financial market turmoil in the United States that has already had global repercussions, after Lehman Brothers filed for bankruptcy and Merrill Lynch was only saved with a takeover by Bank of America.
In its report the ADB said the past eight months of turmoil in the markets had "exploded the myth of uncoupling" and showed economies in Asia were still heavily reliant on industrial countries, notably the United States, for their exports.
Around 85 per cent of footwear imported by the United States and a third of its clothing comes from developing Asia, the bank said.
The ADB sharply increased its inflation forecast for Asia for 2008 from the 5.1 per cent predicted in April to 7.8 per cent, and to 6.0 per cent in 2009.
Economic growth in 2008 is expected to drop from the 7.6 per cent that was forecast in April to 7.5 per cent, and slow further to 7.2 per cent next year.
The ADB said it expected food prices would remain high, and that oil would remain "well above" US$100 a barrel - although New York's main contract, light sweet crude for October delivery, was at just below US$93 Tuesday.
China's economic growth will remain unchanged at 10 per cent this year, the ADB forecast, but it revised down slightly its 2009 forecast to 9.5 per cent on the expectation of a reduced trade surplus and slower investment growth.
The ADB said that while some central banks had started to tighten monetary policy, "some may have let the inflation genie out of the bottle by doing too little, too late, since interest rates in most countries are still lower than inflation."
"Containing inflation will take time as monetary policy works with a lag," the bank said.
The ADB projected double-digit inflation this year for Cambodia, Indonesia, Laos, Philippines, and Vietnam.
"Curbing inflation is the crucial macroeconomic challenge facing most Southeast Asian countries," the bank said.
The ADB also warned that the high prices of food worldwide are not likely to fall any time soon, and that there are no quick solutions to the problem.
"Scarcity is back, hunger is growing, and rapid economic growth is threatened. These are difficult times," the Manila-based lender said in the update of its annual Asian Development Outlook.
"In view of these difficulties, it seems unlikely that basic food prices will return to their real long-run downward trend."
The regional lender did note that food prices were "substantially below the peaks of the previous world food crisis in 1973-74."
But it said this time, price increases had been "sharp and disruptive," affecting the poorest people and food-importing countries the most, increasing inflationary pressure and threatening economic growth.
Studies blamed the high prices on various causes including population growth, a slowdown in agricultural production, the depreciation of the US dollar, high oil prices and the increased demand for biofuels, the ADB said.
Short-term speculation had also fed the price increases, it said.
The bank said even when the panic and speculation subsides, the ew "equilibrium price" for rice is likely to be 50-60 per cent higher than it was in 2007.
"Other basic food commodities are likely to exhibit similar patterns," the ADB added.
To make matters worse, the cost of inputs like fuel and fertilizer are now higher and rising rapidly, the ADB said.
The Asian financial group went on to warn regional governments not to become complacent after recent record increases in crude oil prices, saying the days of cheap oil were over.
Oil prices have fallen more than a third in value from their record levels of above US$147 in July.
Despite that, the Manila-based bank said in its update to its 2008 Asian Development Outlook that high oil prices were here to stay along with periods where the price would be volatile.
It said it expected the world would have to adjust to the price of oil at US$100 or more a barrel.
2 comments:
Predicated on these bad news, is the Cambodian government prepared to open stock market?
This government must be out of its mind to have thought of the possibility.
What about get your act together first. I don't have to tell you what kind of acts you need work on.
Now, get to work, so you can get this corruption-torn country back to work and gain the trust of people again -- we'll never forget what you've done to the country.
Also, remember, when the country collapsed, we'll kill you anyway.
No slow down growth, keep on moving forward.
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