The World Bank warned in a new report that Asian countries are experiencing a decline in the financial resources necessary to continue combating the energy crisis due to the crisis stemming from the United States and Israel's war against Iran. This report emphasizes the potential of artificial intelligence to aid in the growth of Asian economies, but it mentions vulnerability to energy imports as one of the main barriers to this growth.
Impact of Subsidies on Gasoline Prices
The World Bank stated: "Subsidies have been by far the most common policy response among emerging and developing economies to this crisis." The institution added that "countries with significant subsidies have generally experienced a smaller increase in retail gasoline prices, but this relationship has been significantly weakened for overall inflation."
Asian countries are heavily dependent on energy imports, and the energy crisis has become a significant vulnerability for them. However, the World Bank noted that artificial intelligence could change this situation and help alter domestic electricity production patterns, ultimately leading to a reduction in demand for imported energy goods.
Declining Foreign Reserves and Rising Inflation
The response of Asian countries to the energy crisis has led to a decrease in prices, but this reduction has come at the cost of diminishing these countries' foreign reserves. The World Bank warned that the longer the crisis lasts, the greater its impact on the financial health of these countries will be. For example, Indonesia, Thailand, and Vietnam have reduced their dollar reserves by between 15 to 40 percent since the beginning of the war.
The World Bank also emphasized that these reactive measures have had no impact on inflation anywhere in the world, and "overall inflation in many countries has significantly increased, even while core inflation has remained controlled."
However, there is hope for change in Asia, primarily related to information technology and especially artificial intelligence. The World Bank stated: "The region's dependence on industrial activities related to artificial intelligence has been a source of strength, but if global artificial intelligence activities slow down or reverse, it could become a weakness."
