Singapore: El Ni±o is anticipated to pose a significant inflation risk rather than a growth shock for ASEAN economies, with rising prices for rice, wheat, maize, and vegetable oils expected to be the primary channels of impact, OCBC Group Research noted on Wednesday, as reported by Xinhua.
According to Nam News Network, Lavanya Venkateswaran, a senior ASEAN and India economist, highlighted that the Philippines, Indonesia, and Thailand are among the ASEAN economies with higher exposure to El Ni±o, while Malaysia and Vietnam face meaningful but more concentrated risks. Venkateswaran pointed out that higher food prices could "add to regional inflationary pressures," with imported inflation risks increasing, considering that most of this region are net food importers.
She further explained that apart from Thailand and Vietnam, major economies in the region are generally net rice importers, leaving the Philippines, Malaysia, and Indonesia vulnerable to potential terms-of-trade shocks from rising rice prices. Additionally, most economies in the region, including the ASEAN-6, are large net grain importers and are particularly susceptible to imported inflation pressures when global wheat and maize prices escalate.
Venkateswaran noted 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 such as subsidies and price controls.
The growth impact is expected to be more uneven and concentrated primarily in agriculture. Countries with relatively large agricultural sectors, such as Indonesia, the Philippines, Thailand, and Vietnam, are more vulnerable to production losses and weaker rural incomes. However, she mentioned that agricultural exporters like Indonesia, Malaysia, Thailand, and Vietnam could experience some offset from increased commodity export revenues.
"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 concluded.