The Asian Development Bank (ADB) warned that a war in the Middle East is increasing the risk of stagflation for Asian economies due to soaring energy, transportation, and raw material costs. It called for accelerated diversification of energy sources.
June 11, 2569 at 10.11:XNUMX, Nikkei Asia reported that Masato Kanda, President of the Asian Development Bank (ADB), warned that Asian countries are facing the risk of stagflation, or economic slowdown coupled with high inflation. Following the war in the Middle East, energy, transportation, and raw material costs have continued to rise.
Kanda stated during Nikkei's Future of Asia conference that rising inflationary pressures could lead to a stagflation cycle through declining purchasing power from contracting real wages and higher debt burdens from high interest rates.
He stated that commodity prices in Asia are likely to rise further as increased transportation, energy, and raw material costs are being passed on from upstream to downstream of the supply chain. Furthermore, there is a risk of actual supply chain disruptions if the situation persists.
Asia is considered a particularly vulnerable region due to its high reliance on energy imports from the Middle East via the Strait of Hormuz, making it directly affected by the Iranian war in terms of both cost and supply risks.
Kanda acknowledged that many Asian countries are not yet prepared to handle this crisis and should accelerate the diversification of their energy sources. This includes reducing dependence on traditional oil and gas sources, accelerating the use of renewable energy, promoting safe nuclear energy, and improving energy efficiency.
The ADB president views this energy crisis as an opportunity to push for structural energy reforms, particularly the expansion of nuclear energy use in several Asian countries.
Furthermore, the ADB is pushing forward with projects to interconnect international power grids, enabling the export of surplus electricity to neighboring countries. For example, exporting wind power from Laos to Vietnam. Kanda emphasized that efficient cross-border power grids are crucial for regional energy security.
The Asian Development Bank (ADB) is also pushing forward the Pan-Asia Power Grid Initiative to connect electricity systems from Central Asia to Europe and aims to raise US$50,000 billion by 2578 to develop cross-border power grids across the Asia-Pacific region.
In the short term, Kanda stated that the ADB can accelerate the construction of renewable energy projects to bring wind and solar power generation into the system faster and help mitigate the impact of the current energy crisis.
Although geopolitical uncertainty is affecting the investment climate, Kanda believes there is still ample liquidity available for investment in high-quality projects. In this environment, high-risk, high-return projects are attracting increased interest.
Regarding the yen, Kanda, a former senior currency official in Japan, stated that stable macroeconomic policies and market confidence would support the yen in the short term. However, in the long term, structural economic reforms to increase Japan's productivity and competitiveness are most important.
refer : asia.nikkei.com
Read news related to All situations surrounding Asia can be found here.
