News / Africa

Asian Government Subsidies Ease Inflation Pain

A vegetable seller, Vijay Kumar, waits for customers in his shop in an upscale INA market, in New Delhi, India (File Photo)
A vegetable seller, Vijay Kumar, waits for customers in his shop in an upscale INA market, in New Delhi, India (File Photo)

Multimedia

Audio
Heda Bayron

Consumer prices are rapidly rising in Asia, and many people are trying to stretch their budgets. As governments are giving out cash and increasing subsidies on fuel and staple goods to soften the blow on consumers.



In Thailand, food vendors say inflation is biting into their daily profit.

One man says he raised the price of noodles by 16 cents or 5 baht because fuel, cooking oil, chicken and pork prices have all gone up.

A banana fritter vendor says he reduced the number of bananas he sells for 32 cents from 20 pieces to 15 pieces.

"What we see is because the economy is doing well, people feel like they should be able to pass along some of those increases but you’ll never be able to pass a 100 percent," noted Frederico Gil Sander, an economist at the World Bank in Thailand.

Bad harvests, political tensions and higher demand have wreaked havoc on many families’ budgets. Many are getting less for their money.

Oil prices

As world oil prices surged in recent months because of tensions in the Middle East, the Thai government capped the price of diesel - the fuel used by truckers to transport goods from the provinces to the cities - to not more than 96 cents per liter. Indonesia decided to delay a planned cut in fuel subsidies. And in the Philippines, the government approved $11.5 million in fuel subsidies to public transport drivers.

In Hong Kong, a city which imports nearly all its food supply, inflation surged to a 30-month high in February. Shortages and higher demand in mainland China, the source of much of Hong Kong’s food, have spilled over here. One eggplant can now cost more than a dollar in supermarkets.

The government promised to use its budget surplus this year to help citizens by offering electricity subsidies, increasing welfare payments and handing out $770 to every resident.

"Well, I think those subsidies help to provide certain relief especially to the grassroots and the lower middle class," said Connie Bolland, the chief economist of Economic Research Analysis in Hong Kong. "But the amount I think is probably too small to make a difference."

Not sustainable

But economic analysts say that while price controls and subsidies help some people, they are not sustainable because they could cost governments a lot of money in the long run, worsening budget deficits. Sander says subsidies should be targeted to benefit everybody.

"If these subsidies were very targeted to people in the bottom, we think that there will be a lot more to benefit than this overall subsidy which basically ends up reaching everyone," said Sander.

Authorities in China, the Philippines, South Korea, India, Thailand and Indonesia have also raised interest rates in the last two months to reduce the amount of money in the financial system - another means of reining in inflation. They say rates could still go up as long as prices keep on climbing.

Credit costs

Higher credit costs could add to many businesses' woes as they would have to pay more on their loans. Some analysts also worry that it could stifle economic growth, leading to unemployment.

In Hong Kong, authorities have little room to tackle inflation. Bolland says Hong Kong’s fixed exchange rate to the dollar makes Hong Kong assets cheaper to mainland Chinese buyers who hold an appreciating yuan. And that drives up the stock and property market. In some pockets of the property market, prices have surpassed their former peaks in 1997.

"Of course with the liquidity in the system in the mainland, even though they are trying to tighten credit and bank lending and all that, there’s a lot of cash that somehow manages to find its way to Hong Kong," said Bolland.

Positive effect


With every country in Asia struggling to contain rising prices, Sander at the World Bank says inflation has propelled energy efficiency and agricultural productivity higher on Asian governments' agenda.

"In the long term basically you tie this to increases in the productivity of agriculture where there are more people demanding more food," said Sander. "You need to have the supply response and have agriculture produce more food and we think that there is a lot of potential for that. And number two, on the fuel situation. If you need less oil, increases in the price of oil will hurt you less."

The United Nations estimates that between 10 and 42 million people in Asia will be pushed into poverty or prevented from getting out of poverty this year because of higher prices.

You May Like

Video Protests Continue in Ferguson, Spread to Other US Cities

Missouri officials say deployment of more than 2,000 National Guard soldiers helps curb second night of rampant arson and looting in Midwestern town More

Video Ebola, Crackdown on Illegals Hit Business in Guangzhou

Chinese city has largest community of Africans in Asia More

Video Legendary Lebanese Actress, Singer Sabah Dies at 87

Music and film diva, affectionately called 'Sabbouha' by millions of her fans, performed at Carnegie Hall in New York, Royal Albert Hall in London, Olympia in Paris, Sydney Opera House in Sydney More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Changei
X
November 24, 2014 10:09 PM
Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Change

Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Mali Attempts to Shut Down Ebola Transmission Chain

Senegal and Nigeria were able to stop small Ebola outbreaks by closely monitoring those who had contact with the sick person and quickly isolating anyone with symptoms. Mali is now scrambling to do the same. VOA’s Anne Look reports from Mali on what the country is doing to shut down the chain of transmission.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.

All About America

AppleAndroid