Asia's economies have been able to withstand this year's surge in oil prices but the relentless climb is starting to take its toll and high growth rates are now in jeopardy, analysts said.
Crude futures prices reached historic highs at nearly US$45 a barrel last week, causing a slump in regional stock markets and prompting economists to draw up scenarios based on prices breaching US$50 a barrel.
"If energy prices come back down to what we think supply and demand should have them right now, probably around US$30 a barrel, it's not a big deal," David Wyss, chief global economist at US credit rating firm Standard & Poor's, told reporters in Singapore on Friday.
"If they stay where they are now, it's a minor problem. But if they go up to US$70 to US$80 a barrel then you have got some real problems in Asia and everywhere else too."
Joseph Tan, an economist with Standard Chartered Bank in Singapore, said the "big question" was how long oil prices would stay between US$42 to US$50 a barrel.
If prices stayed between these levels for most of the year, then this would impact on Asian growth, Tan said, adding however he thinks prices will ease in the next few months.
He also pointed out any impact "will not be homogeneous given that some countries are more dependent on oil than others," with South Korea, India and Thailand among the most vulnerable.
Ifzal Ali, chief economist of the Manila-based Asian Development Bank (ADB), said the bank's economists recently went back to the drawing board to plot a scenario where prices reach US$50 a barrel.
A bank study in June on the impact of high oil prices on Asia had assumed levels of up to US$40 a barrel.
High oil prices are now a "serious threat not only to Asia but globally as well," Ali told reporters by telephone on Friday.
"The thing is if this increase in oil prices is combined with an increase in interest rates, that would be even more damaging," he said, referring to moves by the US Federal Reserve to raise key interest rates.
Oil prices at US$50 a barrel could shave off 1.1 percentage points from Asia's projected GDP growth next year, compared with 0.8 percent if prices remained at US$40 a barrel, Ali said.
China's GDP would be trimmed by 1.1 percentage points and India's 1.2 percentage points, compared with 0.8 percent for both countries if prices were at US$40 a barrel.
At US$50 a barrel, Asia's trade balance by the end next year would deteriorate 0.9 percentage points and inflation would rise by 1.9 percentage points.
Oil-importing Southeast Asian nations would also be in the line of fire.
For example, the Philippines' GDP would shed 2.6 percentage points if oil prices reached US$50 a barrel, inflation would rise 2.7 percentage points and the trade balance would worsen by 2.1 percentage points.
Thailand's GDP would lose 3.1 percentage points, inflation would increase 2.8 points and trade would worsen by 2.6 points, according to the ADB.
But Standard Chartered's Tan said he believed current high oil prices would not be sustained because this was being caused chiefly by the financial problems of Russian oil giant Yukos, which produces more oil than Libya, a member of the Organization of Petroleum Exporting Countries.
Fears Yukos will shut down its 1.7 million barrels a day production due to a tax dispute with the Russian government sent oil prices soaring its highs last week.
Julian Jessop, chief international economist of London-based research house Capital Economics, said he believed Yukos and Moscow were playing a game of "brinkmanship" and Russian authorities were unlikely to stop production.
But the ADB's Ali said oil prices should stay above US$40 a barrel until the end of this year because, apart from the Yukos factor, the problem of supply disruptions in oil-producers Iraq, Venezuela and Nigeria remained.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
US President Donald Trump yesterday announced sweeping "reciprocal tariffs" on US trading partners, including a 32 percent tax on goods from Taiwan that is set to take effect on Wednesday. At a Rose Garden event, Trump declared a 10 percent baseline tax on imports from all countries, with the White House saying it would take effect on Saturday. Countries with larger trade surpluses with the US would face higher duties beginning on Wednesday, including Taiwan (32 percent), China (34 percent), Japan (24 percent), South Korea (25 percent), Vietnam (46 percent) and Thailand (36 percent). Canada and Mexico, the two largest US trading
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
China's military today said it began joint army, navy and rocket force exercises around Taiwan to "serve as a stern warning and powerful deterrent against Taiwanese independence," calling President William Lai (賴清德) a "parasite." The exercises come after Lai called Beijing a "foreign hostile force" last month. More than 10 Chinese military ships approached close to Taiwan's 24 nautical mile (44.4km) contiguous zone this morning and Taiwan sent its own warships to respond, two senior Taiwanese officials said. Taiwan has not yet detected any live fire by the Chinese military so far, one of the officials said. The drills took place after US Secretary
RSS