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KUALA LUMPUR: Inflation in Asia will hit 5.1 percent in 2008 because
of surging food and fuel prices and could threaten economic growth
in the region, the Asian Development Bank warned Sunday.
“Our projection for inflation for Asia for
2008 is 5.1 percent which is already a 10-year high,” Rajat M.
Nag, managing director general of ADB told reporters at a two-day
World Economic Forum on East Asia here.
“This was a projection we did in April. We are
revising our projections. My feeling is the projections will go even
higher,” he added.
Rajat said Asian monetary and fiscal authorities
should “recognize inflation as a very major concern” and hinted
that they should raise interest rates.
Inflation “can endanger growth in Asia,” he
said, adding that “central banks should take all steps, including
looking at rates as what India has done quite appropriately.”
India’s central bank on Wednesday raised a key
short-term borrowing rate by a quarter percentage point to 8 percent
to battle inflation that analysts say may be headed to double-digit
levels.
Rajat said if Asian economies “do not temper
the inflationary rate which is quite high, you actually will
compromise growth. So it is precisely to sustain the prosperity of
Asia that we need to focus on inflation,” he said.
“Asia has had a very good growth story. We
need to focus on inflationary pressure, otherwise the growth story
will be endangered,” he warned.
Rajat also said that if inflation was not tamed,
it would hurt Asia’s poor.
“Inflation is the worst form of taxation on
the poor. Inflation hurts the poor much more than it hurts the
rich,” he said.
He added that to reduce the impact of the rise
in food and fuel prices on the poor, Asian economies should launch
cash income support programs for the poor, but not a general
subsidy.
“A general subsidy is not fiscally sustainable
and it does not help the very people that need help,” he said.
Rajat urged Asian governments to re-launch the
“green revolution” programs that existed back in the 1960s to
increase food output since prices would climb further.
“We need to recognize that there has been some
structural changes in food and fuel. The era of cheap food is over,
so we need to adjust to higher price regime. There has to be a lot
of effort to increase food productivity,” he said.
-- AFP
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