Singapore: El Ni±o is likely to pose a bigger inflation risk than a growth shock for ASEAN economies, with higher prices for rice, wheat, maize, and vegetable oils expected to be the main channels of impact, OCBC Group Research said on Wednesday, reported Xinhua.
According to Nam News Network, Lavanya Venkateswaran, senior ASEAN and India economist, noted that the Philippines, Indonesia, and Thailand are among the ASEAN economies with higher exposure to El Ni±o, while Malaysia and Vietnam face significant yet more concentrated risks. Higher food prices "can add to regional inflationary pressures, with imported inflation risks also rising considering most of this region are net food importers," she explained.
Venkateswaran pointed out that, apart from Thailand and Vietnam, major economies in the region are generally net rice importers. This leaves the Philippines, Malaysia, and Indonesia vulnerable to potential terms-of-trade shocks due to increasing rice prices. Additionally, most economies in the region, including ASEAN-6, are large net grain importers, making them particularly susceptible to imported inflation pressures when global wheat and maize prices surge.
She further elaborated that the extent of food inflation transmission would vary depending on factors such as the weight of food in consumer price baskets, import dependence, and government intervention through measures like subsidies and price controls.
The growth impact is expected to be more uneven and largely concentrated in agriculture. Countries like Indonesia, the Philippines, Thailand, and Vietnam, which have relatively large agricultural sectors, are more vulnerable to production losses and weaker rural incomes. However, Venkateswaran noted that agricultural exporters such as Indonesia, Malaysia, Thailand, and Vietnam could benefit from higher commodity export revenues, which might partially offset some of the negative impacts.
"The ultimate macroeconomic impact will depend not only on weather outcomes but also on policy responses, including food trade restrictions, stock releases, and subsidy measures," she added.
