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ADB revises inflation rate in 2008 for Asia

By Nor Baizura Basri, Bernama,

Kuala Lumpur : The Asian Development Bank (ADB) is revising its projected inflation rate for Asia in 2008 following the sustained increase in global crude oil prices.

ADB managing director Rajat M. Nag said the intial projection made last April was 5.1 percent, which marked a 10-year high.

“We are revising this as we feel the new inflation rate will be even higher,” he told reporters on the sidelines of the World Economic Forum on East Asia 2008 here Sunday.

Oil prices had ended below US$135 per barrel on Friday.

Nag, who is a panellist at the forum, talked about global challenges that had been identified as a deterrent to economic growth among Asian countries.

According to him, three issues likely to affect Asian economies in the future are inflation, inequality and an infrastructure deficit.

Asian countries needed to see these issues as “shared problems”, he said.

“These are not only national issues but also sub-regional and regional issues that need to be dealt with collectively,” he added.

Citing inflation as the worst form of taxation on the poor, Nag said if prices continued to soar, the poor who spent 70 percent of their budget on food and fuel would be the most vulnerable.

“Therefore, it is very important that monetary and fiscal policy recognised inflation as a very major concern and one that can endanger economic growth in Asia,” he said.

“It is also going to get even harder to deal with growth issues if inflation becomes more entrenched on the continent,” he added.

Recognising this, the ADB was working closely with Asian governments through financing projects and policy dialogues to keep tabs on current issues, Nag said.