ASEAN KEY DESTINATIONS
World Bank concerned about Asian subsidies
The World Bank is concerned about the fiscal burdens of Asia-Pacific and East Asian countries, urging their governments to cut Nehru, the World Bank's chief economist for the Asia-Pacific region, said several countries including Thailand have subsidised their food and energy prices, which will clearly increase their governments' long-term fiscal burden.
The subsidies are unlikely to significantly benefit low-income earners and the governments need more specific measures to help them, he said.
Thailand is among countries implementing subsidies for food and diesel prices while raising interest rates to curb inflation. The Bank of Thailand forecasts inflation to be in a range of 0.5-3.5 percent this year.
Mr. Nehru said regional inflation rates tend to keep rising in line with global rates, which are mainly pressured by commodity prices. Japan's reconstruction after the deadly earthquake and tsunami seems likely to tighten inflationary pressure across the region.
It is also estimated Japan may need five years to rebuild from the catastrophe that has caused up to US$235 billion of damage, with a likely shaving of up to 0.5 percentage point from its economic growth this year, said the bank's report.
However, Japan's crisis is unlikely to have a significant impact on regional economies. Rising inflation in the Asia-Pacific and East Asian regions is mainly a result of China's fast growth and the countries' domestic consumption. The political crisis in the Middle East will cause oil prices to continue to rise.
About 25 percent of East Asia's long-term foreign debts are denominated in Japanese yen, ranging from 8 percent in China to 60 percent in Thailand.
Thailand's foreign debts represent only 10 percent of the government's total debt, of which 60 percent is in yen.
Every 1 percent appreciation in the yen is likely to raise annual debt servicing on yen-dominated assets held by East Asia's developing nations by about $1 billion.
The World Bank estimates Thailand's GDP growth will expand by 3.7 percent this year, supported by rising rural incomes due to stable farm prices as well as fast-growing demand within East Asia for goods and services.
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