East Asia faces ‘testing times in 2008′

April 1st, 2008 - 4:40 pm ICT by admin  

(Lead, changing dateline)
Singapore, April 1 (DPA) Rising food and fuel prices are presenting East Asia with “testing times in 2008,” the World Bank warned Tuesday. Growth for developing countries was forecast at 8.5 per cent compared with 10.2 per cent last year and the lowest since 2002, said the half-yearly report on the region.

“The near-term outlook for the region will depend to a large extend on the robustness of domestic demand in the face of slower exports,” it said.

The report singled out rising inflation as the biggest challenge, greater than the financial turmoil triggered by the US sub-prime mortgage woes.

Rising food and fuel prices have pushed inflation to a 26-year-high in Singapore, a 14-month high in India and the highest in more than a decade in Hong Kong and China, the report said.

Asia needs to move toward more flexible exchange rates to make use of monetary policy to tackle inflationary pressures, the report said.

Hit worst are the urban poor and rural workers who devote between one-third to two-thirds of their spending to food. While soaring fuel affects everyone, the report noted the poor are disproportionally hit.

Turning to China, the World Bank said economic growth will slow to an estimated 9.4 per cent this year from 11.4 per cent in 2007.

Growth next year is likely to ease further.

“While the uncertain global outlook may slow China’s exports, the country’s growth is expected to remain robust,” the report said, noting policy-makers have been trying to keep the economy from overheating.

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