ASEAN finance ministers met in Vietnam yesterday to look at ways of coping with soaring prices and the global economic slowdown, which are expected to hurt growth across the region.
The spiraling cost of fuel and rice has drawn warnings of unrest and the ASEAN meeting comes just days after the Asian Development Bank and the World Bank both cut growth forecasts for this year — in part over surging inflation.
Ministers from the 10-nation ASEAN gathered in Danang, looking for the “best common measure” to address the situation, Vietnamese Deputy Prime Minister Nguyen Sinh Hung said.
“Recent developments in global and regional financial conditions are posing new challenges to maintaining macroeconomic stability and growth of individual countries and the whole region,” he said at the annual one-day meeting.
But many experts believe that Asia in general will be able to weather the financial turmoil that started in the US with the subprime mortage crisis better than it would have been able to do in the past.
With the crisis hitting demand in the US, a key export market for Asian nations, there was nevertheless still cause for a “cautious optimism” in the region, World Bank Managing Director Juan Jose Daboub said.
“East Asia’s strong, long run of growth has not been driven by year-to-year fluctuations in world demand, but rather by improvement in productivity, innovation, quality control, education and skills,” he said. “These underlying strengths of East Asian economies will neither be undone by the financial turmoil nor by a slowing global market.”
But he stressed that nations still had a tricky task ahead, not least because of the mounting food prices that are having an especially strong impact on the region’s many poor.
Daboub said there were “three balls” to juggle: “One being the impact of the situation in the United States ... the second ball being of course food prices and oil prices and the third one keeping the pace of reforms.”
“In virtually every East Asian country, high food prices are raising headline inflation and contributing to a significant decline in the real incomes of the poor,” he said.
In part because of those soaring costs, this week the Asian Development Bank and World Bank both reduced their forecasts for the region, excluding Japan.
The World Bank said there could be an aggregate income loss of 1 percent of GDP because of price increases.
“Dealing with high food and fuel prices probably constitutes a greater challenge to governments in East Asia than the financial turmoil in the United States and a slowing global economy,” it said.
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