Inflation ravaging Asia's economies

Prices are also on an upswing in the United States and Europe, but the biggest increases are being felt in Asia, where Vietnam, Sri Lanka, India, Pakistan, Bangladesh, the Philippines and Indonesia are already reeling from double-digit inflation.

South Korea yesterday announced sweeping tax reforms, including income- and corporate-tax cuts designed to stimulate sluggish private consumption and business investment. By 2012, some 26 trillion won (Bt756 billion) will be slashed.

Vietnam, with an overheating economy after years of successive high growth, recorded the highest inflation rate in the region at 27 per cent, followed by Sri Lanka at 26.6 per cent, while Singapore saw the largest jump, from 1.3 per cent in 2007 to 7.5 per cent this year.

Faced with the prospects of civil unrest, governments across Asia have come up with stop-gap measures, from cash handouts and food coupons to subsidies on utilities, to shield the poorest segments of their populations from the onslaught of surging prices.

In the Philippines, the government has provided food, diesel and electricity subsidies to poor households.

The country's inflation hit a 17-year high of 12.2 per cent in July, the highest annual rate since December 1991, when consumer prices rose 13.2 per cent.

Manila provided a 500-peso (Bt370) subsidy to small consumers of electricity and "rice passes". It also exempted minimum-wage earners from income tax and raised tax exemptions. A food-for-school programme was also implemented.

In India, the government unveiled a US$15-billion (Bt515-billion) debt-relief package for poor farmers and announced a major wage hike for civil servants as inflation raced to a 13-year high of 12.44 per cent for the week ending August 2. A year ago, inflation was only 4.39 per cent.

Thailand announced a Bt47-billion comprehensive stimulus package in July to help low-income households and businesses cope with rising prices. Thailand's inflation rate surged to a new 10-year high of 9.2 per cent in July but eased to 6.4 per cent in August.

Even Singaporeans, Southeast Asia's wealthiest people, are also reeling from the city state's worst inflation in 26 years. For several years, Singaporeans have been accustomed to an inflation rate of around 2 per cent, but it spiked this year to 7.5 per cent, the highest since 1982.

The government has set aside 3 billion Singapore dollars (Bt72 billion) this year to help Singaporeans cope with the hard times. In October, the government will pay out the second instalment of growth dividend to Singaporeans from the nation's budget surpluses. The government has also doled out cash to needy families.

In Vietnam, inflation skyrocketed in July to 27 per cent, its highest level in 17 years. To curb inflation, the government has tightened credit rules for banks and raised interest rates. In March, it froze the prices of key commodities, including petrol.

Noel Adlai O Velasco