Apec finance ministers grappled on Thursday with the risks posed to their economies by record high oil prices as the World Bank said prices could spike sharply if there was a disruption to supply.
"Ever-soaring oil prices are ... pressing hard against most Apec member economies, thus clouding the growth forecast of the Asia-Pacific region," South Korean Finance Minister Han Duck-soo said at the start of a two-day meeting of finance ministers for the Asia-Pacific Economic Co-operation (Apec) forum.
In a presentation to the forum, the World Bank expressed concern that there were considerable uncertainties about oil in the short term, and the tightness of the market meant that prices could rise sharply if supply was disrupted.
US light crude oil hit a record high of $70.85 a barrel last week.
Shengman Zhang, managing director of the World Bank, said the oil price surge underscored the need to cut subsidies, which can threaten fiscal sustainability and undermines energy efficiency.
Zhang welcomed moves to cut subsidies by several Apec countries, including Malaysia, Thailand and Indonesia.
South Korea's Han said concern was also growing that an unprecedented bubble was forming in real estate markets around the world. If it burst, it would seriously hamper the growth of both local economies and the global economy, he said.
An International Monetary Fund paper said a surge of private inflows to Asia provided needed capital for rapidly growing economies, but also created the potential for instability on exchange rates and economies if it was suddenly withdrawn - as happened in the Asian financial crisis of 1997/98
Net private capital flows to emerging Asian markets neared $150 billion in 2004 alone, up sharply from a little over $50 billion in 2003, according to IMF data.
The tension between maintaining low inflation and nominal exchange rate stability remained a key issue across Asia, the IMF said.
Exchange rate flexibility was one way to improve a country's ability to absorb large capital inflows, as the IMF said it would discourage perceptions of one-way currency bets and cut down on the need for central bank intervention to keep currencies stable.
The Apec finance ministers are meeting on the resort island of Cheju in South Korea. The 21-member group's annual summit meeting in the South Korean city of Pusan in November.
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