Singapore: El Nino is poised to exert a significant inflationary effect on ASEAN economies, primarily through increased prices of essential commodities such as rice, wheat, maize, and vegetable oils, according to OCBC Group Research's recent findings.
According to Nam News Network, Lavanya Venkateswaran, a senior ASEAN and India economist, highlighted in a note that countries like the Philippines, Indonesia, and Thailand are particularly susceptible to the challenges posed by El Ni±o. Meanwhile, Malaysia and Vietnam, although facing substantial risks, experience them in more concentrated areas. The economist emphasized that the rise in food prices could intensify regional inflationary pressures, especially considering that most ASEAN nations are net importers of food.
Venkateswaran further elaborated that except for Thailand and Vietnam, major ASEAN countries are generally net importers of rice. This status leaves nations such as the Philippines, Malaysia, and Indonesia vulnerable to potential trade disruptions caused by escalating rice prices. Additionally, the region's dependency on grain imports, especially among ASEAN-6 nations, could lead to heightened inflation pressures with any surge in global wheat and maize prices.
The transmission of food inflation is expected to vary, influenced by factors such as the proportion of food in consumer price indexes, the degree of import reliance, and governmental interventions like subsidies and price controls. While the growth impact might be uneven, with a focus on agriculture, countries with significant agricultural sectors such as Indonesia, the Philippines, Thailand, and Vietnam are at risk of production losses and reduced rural incomes.
However, Venkateswaran noted that agricultural exporters like Indonesia, Malaysia, Thailand, and Vietnam might partially benefit from increased revenue due to higher commodity export prices. The overall macroeconomic impact, she concluded, would depend on a mix of weather outcomes and policy responses, including potential food trade restrictions, stock releases, and subsidy mechanisms.