Growth will slow across Asia as inflation-busting monetary policies take hold in the region, the global ratings agency Standard and Poor's said Tuesday. “With the exception of New Zealand, every country we cover has begun raising policy rates and is expected to continue to do so for the rest of 2008,” Standard and amp; Poor's chief economist Subir Gokarn said in a statement. Soaring food, commodity and fuel costs - and the measures policy makers have taken to combat them - have surpassed the US economic slowdown as the main drag on the region, the agency said in its latest regional economic outlook, released Tuesday. It said gross domestic product growth in China would drop to 9.8 percent to 10.3 percent for 2008, down from 11.9 percent last year. India's economy would grow 7.5 percent to 8 percent for 2008, down from 9 percent last year; and Japan's growth would fall to 1 percent to 1.5 percent, down from 2 percent last year. And though exports have been bolstered by sustained regional demand, especially in India and China, “exorbitant” oil import bills have cut into current account balances, and large oil subsidies are a growing fiscal concern in many countries, he said. Many emerging economies reacted to high oil prices as a temporary shock, putting in place generous subsidies to shield their consumers from the spiraling cost of oil on global markets. “In recent weeks, in recognition of at least the oil shock being more persistent, most countries have allowed domestic fuel prices to increase, even if partially,” Standard and amp; Poor's said in its report. “There is little question that, as long as oil prices remain at current levels, or even decline moderately, the price adjustments will keep up the pressure on inflation rates across the region.” In the last few months, India, China, and Indonesia have all trimmed their fuel subsidies, Gokarn said. As Asia's millions of consumers begin to feel the pinch of higher prices, global demand will likely fall, putting downward pressure on oil prices, Gokarn said. India, which imports about 70 percent of its oil, is now considering further hiking the domestic price of gas and diesel, a politically difficult move in the run up to national elections, next May. Government officials have estimated the tab for fuel subsidies at 2.5 to 5 percent of the nation's $1 trillion gross domestic product. Still, Gokarn emphasized that he doesn't foresee a regional macroeconomic crisis anytime soon. “From a macroeconomic perspective, I would emphasize that this narrowing of the balance of payment surplus is significantly offset by fact that these countries have for the most part very large reserves,” he said in a conference call.
