With the war in the Middle East driving up inflation in global economies, Asian economies are at risk of stagflation, Nikkei Asia reported Thursday, citing Asian Development Bank President Masato Kanda.
As inflation pressures mount, "There is now a risk of stagflation spiral" due to "declines in demand through lower real wages, and increases in debt burdens from higher interest rates," Kanda told the news outlet on the sidelines of Nikkei's annual Future of Asia forum.
According to Kanda, higher shipping, energy, and input costs will lead to a further rise in consumer prices in Asia. There was a risk that the supply chain system would "physically stop functioning," he said.
Asian countries are especially impacted by the energy crisis arising from the Middle East war, as they are highly dependent on energy imports that come in through the Strait of Hormuz, the report added.
"In addition to diversification of the destination of oil and gas, accelerated use of renewable energy and safe nuclear power, as well as stronger energy saving, should have been promoted," Kanda said.
(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)
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