ADB, Oil

Soaring oil prices a long-term threat to Asia — ADB

November 2, 2007 (Reuters) – Rising inflation in emerging countries in Asia is still manageable but further rises in oil prices would pose a long-term threat to the region’s economies, a senior Asian Development Bank official warned Thursday.

“Obviously, the increase in oil prices is a big challenge,” Jong-Wha Lee, head of Regional Economic Integration at the ADB, told Reuters in an interview.

Oil prices scaled record highs above $96 a barrel on Thursday, while China unexpectedly raised domestic gasoline and diesel prices by 10 percent, the first increase in 17 months.

According to an ADB estimate, a $10 rise in oil prices would slash growth rates for emerging Asian countries, big importers of oil, by 0.6 percentage point.

But Lee said the impact of rising oil prices on economic growth in emerging Asian countries had been limited so far thanks to recent efforts to promote energy efficiency and other steps to cope with rising energy prices.

“The question is inflation,” Lee said, noting China’s monthly inflation rate of roughly 7 percent is “very high.”

“Inflation rate is still manageable but if oil prices keep rising, it will clearly be a long-term threat and risk, not just for inflation but also for the real economy,” he added.

Lee said there was no need to exaggerate such risk and added that the ADB still expected the economic growth of Asia’s emerging economies to remain robust this year and next.

The Manila-based multilateral agency forecast in September that Asia’s developing economies, the fastest growing nations in the world, would expand 8.3 percent this year and 8.2 percent in 2008.

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