High Oil Prices May Trim Asian Economic Growth - ADB

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Byline: JAY SHANKAR

HYDERABAD, India, May 5 (AFP) -- High oil prices may shave off at least 0.6 percentage points from Asia's overall economic growth, the chief economist of the Asian Development Bank (ADB) told AFP.

"There are two aspects to the oil price increase. One is the magnitude of the increase and the second is the duration," Ifzal Ali said noting that if the increase lasts for a year, growth in the gross domestic product (GDP) will slow.

"If you have an oil price increase of about $10, from $60 to $70, developing Asia's GDP growth rate will be shaved off by about 0.6 percentage points," Ali said on the sidelines of the ADB's 39th annual general meeting being held in southern India.

Oil prices headed back toward an all-time high of $75.35 a barrel hit on April 21 amid ongoing concerns over Iran's nuclear ambitions.

Ali said slower growth rates will vary by country with China down by about one percentage point, India by 1.1 percentage point and Thailand by 1.8 percentage point.

He said government-driven subsidies to keep prices on oil products low were not sustainable in the long run.

"There are many countries in Asia, including India, where the process have a long way to go. Either there are nations where subsidies are absorbed in the budget like Thailand or absorbed in the balance-sheet of state-owned petroleum companies like in India," Ali said.

India produces about 30 million tons of crude oil annually but it imports 70 percent of its energy needs. …