Asia, Middle East outlooks affected by oil prices
| Pages | 301-303 |
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Higher oil prices are one of the obstacles to continued strong growth in Asia and the Middle East, according to the IMF's Regional Economic Outlooks. The reports, part of the IMF's enhanced regional surveillance, urged oil-consuming countries to pass through higher energy prices to avoid mounting fiscal costs and encouraged oil-producing countries in healthy fiscal positions to foster long-term growth by increasing productive spending.
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The strengthened economic performance of Asia and the Middle East over recent years is expected to continue this year and next, although high oil and petroleum prices pose major risks in both regions, according to the IMF's Regional Economic Outlooks. The reports, launched by senior IMF staff of the Asia and Pacific (APD) and Middle East and Central Asia (MCD) Departments, urged oil-consuming countries to pass through higher oil prices to avoid mounting fiscal costs, and oil-producing countries to invest in physical and human capital to foster long-term growth. The regional outlooks are part of the IMF's enhanced regional surveillance and complement the biannual World Economic Outlook.
Asia. Growth in Asia has been impressive, averaging 5.5 percent a year during 1999-2004, and is forecast at 6.1 percent this year and 5.9 percent next year, propelled by vigorous exports and strong domestic demand in China and India. Inflation is expected to remain moderate as lower food prices offset higher oil prices, and the region's current account balance is forecast to remain in surplus at around 3 percent of GDP. Presenting the report in Tokyo, APD Director David Burton stressed that the growth outlook for Japan, in particular, has improved considerably-to 2 percent, from only about 0.8 percent in the spring-as domestic demand is regaining momentum.
High petroleum prices, however, remain a particular danger because many Asian economies are manufacturing-intensive and highly oil-dependent. Some governments have shielded consumers from higher costs by passing only a portion of the increases in world prices on to domestic prices, but some are now reconsidering this practice. Indonesia, for example, recently cut fuel subsidies. IMF Chief Economist Raghuram Rajan hailed this move as "an extremely good step in the right direction" and urged other countries to adopt similar measures.
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