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Kuala Lumpur: Asian governments need to consider raising interest rates and other measures to cool inflation, which is becoming the biggest risk to economic growth in the region, the Asian Development Bank said.
Asia's "growth story is in danger," Rajat M. Nag, managing director-general of the bank, told reporters at the World Economic Forum on East Asia in Kuala Lumpur on Sunday. Asia has "got to worry about inflation, it is the number-one concern now for Asia."
The Asian Development Bank, which in April forecast inflation in Asia at 5.1 per cent this year, the highest in a decade, will likely raise its target after food and fuel costs increased, he said. India and Malaysia were forced to raise fuel prices this month after crude oil almost doubled in a year, risking fanning inflation and social unrest.
"I have a lot of sympathies for the political leaders who have to balance that," said Nag. "Our suggestion is the governments should consider targeted cash-income support for the poor and real poor, not a general subsidy, as it is not sustainable."
Indonesia raised fuel prices by an average 29 percent on May 24, the first increase in almost three years, to cut subsidy costs.
"Inflation is the worst form of taxation on the poor," Nag said.
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