Higher Crude Oil Prices May Threaten Growth in Emerging Markets
Since the beginning of 2008 most of the Asian governments had to cut their fuel subsidies because skyrocketing crude oil prices threatened their budget balance. As a result inflation rates increased to their highest level in may 2008. The central banks of India, Indonesia and the Philippines already raised their key interest rates this June and Malaysia and Thailand are expected to follow at their next central bank meetings.
At the moment the GDP is still growing at a respectable level but recent data already shows a remarkable decline in consumer confidence. With high inflation and further possible rate increases investors will have to find better places to invest their money than in the stock market.
| country | GDP growth (YoY) | inflation (may 08) | key interest rate | local currency vs EURa) |
| India | 8.8% | 7.9% | 8.00%1) | -14.1% |
| Indonesia | 6.3% | 10.4% | 8.50%2) | -4.1% |
| Malaysia | 7.1% | 3.8% | 3.50%3) | -3.8% |
| Philippines | 5.2% | 9.6% | 5.25%4) | -13.0% |
| Thailand | 6.0% | 7.6% | 3.25%5) | -17.4% |
a) since 31.12.2007
1) On June 5th, 2008 Bank Indonesia raised its key interest rate by 25 basis points to 8.5%.
2) On June 4th, 2008 the Reserve Bank of India raised its key interest rate by 25 basis points to 8%.
3) On May 26th 2008 Bank Negara Malaysia kept its key interest rate unchanged (no change since April 2006)
4) On June 5th, 2008 Bangko Sentral ng Pilipinas raised its key interest rate by 25 basis points to 5.25%.
5) On May 21st, 2008 Bank of Thailand kept its interest rate unchanged (no change since August 2007)
