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The Asian Development Bank (ADB) sees slower-than-expected growth
for the Philippines this year, as the Manila-based lender trimmed
forecasts for the region and said the days of cheap food are over.
On Tuesday, ADB cut its 2009 growth forecast for
the region’s developing economies to 7.6 percent, citing tighter
credit and soaring food and energy costs.
The bank trimmed its previous growth forecast
from April of 7.8 percent, and said actual growth could be lower if
either inflation or the US economic slowdown were worse than
expected.
It maintained the 2008 growth forecast for the
region at 7.6 percent, with China set to dip below five years of
double-digit growth to 9.9 percent in 2008 and 9.7 percent next
year.
But, it sharply raised its 2008 inflation
forecast for East Asia to 6.3 percent this year, from 5.1 percent in
its April outlook. Inflation averaged 3.9 percent in East Asia last
year.
Vietnam would be the worst off with 19.4-percent
inflation in 2008 and 10.2 percent next year. The ADB warned Hanoi
to “act decisively and swiftly to prevent the economy from
deteriorating further.”
The bank urged a “more decisive tightening of
monetary policies” to fight the scourge of inflation and prevent
it eating away the fruits of speedy economic growth.
It noted that many governments were “behind
the curve” on the issue and warned the inflation problem was
deepening.
“The risk of inaction is rising, and the
region’s monetary authorities need to formulate more forceful and
preemptive policy responses,” the ADB said.
While economic growth in developing Asia in the
first three months of the year was stronger than expected, it eased
in the second quarter as slower growth in industrialized nations
began to bite, the bank said.
Growth in the industrialized economies of Hong
Kong, South Korea, Singapore and Taiwan would slow to 4.7 percent
this year amid weaker demand for their exports, before recovering to
4.9 percent next year, it said.
Aggregate economic growth in the other large
economies of the Association of Southeast Asian Nations should ease
to 5.5 percent this year, with prospects in Indonesia, Malaysia and
the Philippines moderating, it added.
The Philippine government predicts a GDP growth
of between 5.7 percent and 6.5 percent this year and 5.7 percent in
2009. GDP refers to the cost of all final goods and services
produced within a country in a year.
The region’s developing nations should weather
the storm “relatively well,” the ADB said, adding that central
bankers were faced with a dilemma in trying to keep inflation in
check without depressing the economy.
“Rapidly rising inflation threatens to dampen
consumer spending and risks a wage-price spiral that could derail
the region’s recent solid growth,” it said.
As it has in the past, the bank said Asian
nations should allow their currencies to appreciate faster to help
contain price pressures.
Bye cheap foods
The era of cheap food for Asia is over as
surging demand, supply problems and the growing production of
biofuels will keep food prices high, the bank reported also on
Tuesday.
The Manila-based lender warned that while
previous food price surges were “cyclical and temporary,” the
higher prices now being seen were caused by permanent changes.
“This time, the impetus appears to come from
persistently rising demand . . . primarily from rapidly growing
emerging market economies, suggesting that there is a structural and
permanent trend at work,” the report said.
The ADB cited the average 7.4-percent growth in
gross domestic product (GDP) in Asia since 2000, saying it had
created a “structural shift in demand, particularly for food.”
Higher incomes have resulted in increased food
consumption and a greater demand for meat, which bolsters the need
for grain and feedstock.
This shift comes as agricultural productivity
remains low or stagnant, with production unable to meet the demand
because of low capitalization and underinvestment in agricultural
research and development, the bank said.
Growing urbanization has also created competing
demands for land and water, while rising energy prices have
increased the costs of fertilizer, irrigation and food transport by
30 percent to 50 percent in the past year, it said.
Production of biofuels in Europe and the United
States, frequently supported by government subsidies, have also
driven up the prices of agricultural commodities such as corn,
forcing increased use of substitutes like soybean and palm oil.
The ADB said public hoarding, through export
bans and restrictions in China, Thailand and Vietnam, and
panic-buying in the Philippines, had contributed to the price
pressures.
Because only 10 percent of total rice production
is traded internationally, any news of supply disruptions,
especially in big producer countries such as Vietnam and Thailand,
quickly set off price spikes, the bank said.
Strong economic growth is likely to keep demand
on the rise, while biofuel production is expected to grow.
-- AFP with The Manila Times
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