Rising food and commodity prices that are stoking inflation will probably dominate a meeting of the Asian Development Bank as the region's finance ministers seek ways to shield their economies from higher costs.
Japan's Fukushiro Nukaga, China's Xie Xuren, South Korea's Kang Man Soo and Southeast Asian ministers are meeting at the sidelines of the Asian Development Bank's annual gathering in Madrid this weekend. Inflation in Asia is expected to reach a decade-high this year even as economic growth cools, ADB predicts.
Crude oil has risen 85 percent, and rice prices have more than doubled since Asian finance ministers met a year ago in Kyoto, Japan. The increases have stoked social tensions and led to wider fiscal deficits as governments subsidize food and energy costs for their people.
``Inflation will be pushed to the fore over global growth concerns,'' said Tetsuo Yoshikoshi, an analyst at Sumitomo Mitsui Banking Corp. in Singapore. ``There's little Asia can do to avoid a global slowdown but cooperation to contain inflation, especially on food prices, is possible.''
Vietnam and other rice-producing nations have curtailed exports to maintain supplies and damp local inflation, pushing up prices for buyers such as the Philippines, the world's biggest importer of the grain. Corn, wheat and soybean prices have all reached records this year too.
``Several Southeast Asian countries are major rice producers and exporters and more can be done within the region to help each other out,'' said Joseph Tan, a strategist at Fortis Bank in Singapore. ``The question is whether there is the political will to do so.''
Slower Growth
Asian governments are predicting growth to be at the lower end of targets, or are reducing their forecasts even as they increase their estimates for inflation.
The U.S. economy grew 0.6 percent in the first quarter, matching the pace of the previous period, which was the slowest since 2002. The International Monetary Fund last month lowered its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression.
The Bank of Japan on April 30 said the world's second- largest economy will probably expand at a slower pace this year than it had expected six months ago, while almost tripling its forecast for core consumer prices. Indonesia lowered its growth estimate on the same day, and South Korea has said its economy entered a ``downturn.''
Foreign Reserves
Finance ministers from China, South Korea and Japan will gather for a meeting on May 4, before getting together with their counterparts from the 10-member Association of Southeast Asian Nations. Besides inflation and the outlook of the region's economies, issues that will be discussed include the pooling of foreign-exchange reserves and the development of bond markets.
Officials last year agreed to set aside part of their $3.4 trillion of foreign reserves to be tapped by member nations when needed, an expansion of a current arrangement that only allows for bilateral currency swaps.
The pool may ensure central banks have enough to shield their currencies against any speculative attacks after the Asian financial crisis a decade ago depleted the reserves of some countries. The ministers are expected to discuss the size of the pool, estimated at between $80 billion and $100 billion, and when they would start the arrangement.
`Counter Instability'
The ministers from South Korea, Japan and China will also discuss setting up a forum on the economy and financial regulatory issues when they meet in Madrid, South Korea's finance ministry said in a statement.
The three finance ministers ``will discuss setting up an Asian Financial Stability Forum to strengthen regional cooperation among the policy and financial supervisory authorities to counter instability of international financial markets,'' the ministry said.
``The purpose of the fund would be to heal wounds when they are still small should liquidity or financing problems arise,'' Hiroshi Watanabe, Japan's former top currency official, said in an interview last month. ``It would be like a first-aid measure that would provide care before the International Monetary Fund gets involved.''
Officials will also participate in seminars organized by the Manila-based ADB at the Madrid meeting from May 3 to 6. The lender's governors, who include Japan's Nukaga and Indonesian Finance Minister Sri Indrawati Mulyani, will discuss the ADB's strategy to boost infrastructure development and partnerships between companies and governments.
Fighting Poverty
At last year's meeting, the bank was rebuked by members on its long-term plan to focus on financing roads and ports instead of fighting poverty. The group is owned by 67 member countries, both from within and outside of the region.
The ADB was formed in 1966 to improve the welfare of people in the Asia and the Pacific. Two-thirds of the world's poor reside in the region, and about 600 million Asians survive on less than $1 a day.
The lender expects to disburse about $10 billion in loans in 2008, after lending $10.1 billion last year, ADB managing director Rajat Nag said in an interview in Singapore last week. It may issue between $9 billion and $10 billion in bonds this year, Nag said.
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