Inflation in Asia to rise, may endanger growth

INDIA: Inflation in Asia will hit 5.1 percent in 2008 due to surging food and fuel prices and will 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 “recognise 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 8.0 percent to battle inflation that analysts say may be headed to double-digit levels.

Rajat said if Asian economies “do not tamper 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.

Kuala lumpur, Sunday, AFP