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
TEXT SIZE - +
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

Multimedia Anti-Keystone XL Protests Continue

Demonstrators are worried about pipeline's effect on climate change, their traditional way of life, health and safety More

Thailand's Political Power Struggle Continues

Court gave Prime Minister Yingluck Shinawatra until May 2 to prepare her defense over abuse of power charges but uncertainty remains over election timing More

Malaysia Plane Search Tests Limits of Ocean Mapping Technology

Expert tells VOA existing equipment’s maximum operating depth is around 6 kilometers as operation continues on ocean bed for any trace of MH370 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.
Pet Kangaroo Helps Spread Environmental Messagei
X
Penelope Poulou
April 22, 2014 5:53 PM
Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pet Kangaroo Helps Spread Environmental Message

Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pro-Russian Separatists Plan 'Federalization Referendum' in Eastern Ukraine

Pro-Russian separatists in eastern Ukraine say they plan to move forward next month with a referendum vote for greater autonomy, despite the Geneva agreement reached with Russia, the U.S. and Ukraine to end the political conflict. VOA's Brian Padden reports from the city of Donetsk in Eastern Ukraine.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video International Students Learn Film Production in World's Movie Capital

Hollywood - which is part of Los Angeles - is the movie capital of the world, and many aspiring filmmakers go there in hopes of breaking into the movie business. Mike O'Sullivan reports that regional universities are also a magnet for students who hope to become producers or directors.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid