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TOKYO: Asia’s emerging economies are “highly vulnerable” to
skyrocketing oil prices, making inflation the number one concern for
policymakers, the head of the Asian Development Bank (ADB) said
Friday.
But emerging Asia looks set to avoid a sharp
slowdown given strong economic growth in China and should easily
avoid a repeat of the financial crisis that rocked the region a
decade ago, said ADB President Haruhiko Kuroda.
“Emerging Asian economies are highly
vulnerable to surging oil prices, given their high dependence on oil
imports and low energy efficiency,” he told a press conference at
the Foreign Correspondents’ Club of Japan.
“With the global economy slowing and oil
subsidies being phased out, high oil prices could have a more
visible impact on domestic consumption and growth in the region this
year and in 2009,” he warned.
Oil prices have soared five-fold since 2003 amid
rising demand in emerging economies such as China and India and
fears of supply shortages. World oil prices shot above $146 a barrel
Thursday for the first time ever.
Central banks in emerging Asia face a dilemma
about how to contain inflation through higher borrowing costs while
avoiding snuffing out economic growth, Kuroda noted.
While rate rises may put the brakes on growth,
“the risk would be even greater if prices spiral out of
control,” he said.
Despite inflation worries, the ADB chief
expressed optimism about prospects for the region’s economies.
“On the whole economic growth in Asia is quite
robust. A sharp slowdown is still unlikely in emerging Asian
countries,” said Kuroda, who is in his native Japan for next
week’s summit of leaders from the Group of Eight rich nations.
“I’m reasonably confident that nothing like
the Asian currency crisis 10 years ago would happen in the
region,” he added, noting that countries had built up large
foreign currency reserves.
The East Asian financial crisis began in 1997,
when Thailand floated the baht after a series of speculative
attacks, leading to a plunge in its value.
Other regional currencies also came under
pressure and countries including Indonesia, Thailand and South Korea
were forced to turn to the International Monetary Fund for emergency
funds to try to stabilize their currencies.
-- AFP
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