IThere is NFLATION The effects of supply constraints, curb restrictions, and a growing economic recovery have pushed many rich worlds to decades of highs in the past year that have helped keep consumer prices high. In Asia, however, price pressures are much weaker. Why?
In most areas of China, Hong Kong, India, Indonesia, the Philippines and Vietnam – inflation in the last decade before the epidemic was actually below average, notes Abdul Abiad, director of macroeconomic research at the Asian Development Bank. Where it is higher than the 2010-2019 average ে Malaysia, Singapore, South Korea, Taiwan and Thailand — it is about two percent or less.
The difference between East and West is the result of various factors. In North America and Europe, some inequalities with rising prices, as well as many non-Asian emerging markets, come down to food. Where global food prices have risen, Mr Abiad notes that the impact has been uneven. In the 12 months to the end of January, corn and wheat prices rose 18% and 20%, respectively. In contrast, rice prices fell by almost one-fifth at the same time. In countries like the Philippines, rice accounts for one-fourth of the food price of the consumer price index and one-tenth of the entire index. In China in particular, the average wholesale pork price has dropped by more than half in the 12 months since January, as the African swine fever epidemic that has spread across the country since 2018 has begun to decline.
The impact of food prices is most evident in developing economies, but rich Asian countries also have reason to record lower inflationary pressures. For one, the supply-chain barrier is not as severe as in the West. The cost of shipping a 40-foot container from Shanghai to Rotterdam rose nearly 60% to $ 13,686 last year, according to Drury, a supply-chain consultancy. In contrast, the cost of a return trip is slightly higher than its tenth, $ 1,445, down 1% from last year. Surveys of purchasing managers suggest that supplier delays are still worsening in most of Europe and the Americas, but falling in China, India, Indonesia, Thailand and Vietnam.
Countries have also come out of the epidemic in different ways. Researchers at Capital Economics, another consultant, note that inflation is lower in Asia’s “reopened” consumer services. In Indonesia, Malaysia, the Philippines, Singapore, South Korea and Taiwan, inflation for recreational and cultural services is about 4% or less of the American annual rate. The difference may be due to the gradual relaxation of restrictions as well as the shortage of international tourists.
All kinds of inflationary pressures cannot be avoided. Energy prices are more influenced by global trends than other products and services. Rising energy costs have been the biggest contributor to rising inflation in Asia, with one-third of total growth recently, according to analysts at Goldman Sachs, a bank.
Many economies in the region may face higher interest rates despite their modest inflation. A possible rise in interest rates from the Federal Reserve this year raises the threat of a stronger dollar, which will bring in imported inflation in Asia. Monetary policymakers in Indonesia, Singapore and South Korea have already announced small steps to tighten monetary policy. They are less likely to end. 3
This article is published in the section “Finance and Economics” under the title “Rice moderation”.