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Asia’s inflation buffers weaken

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Today we look at how Asia’s anti-inflationary defenses are weakening. What big central banks are doing this week? And how are global imbalances widening?

Asia's inflation buffers weaken
Asia’s inflation buffers weaken

The worst to come

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But now, the months since Russia’s invasion of Ukraine have passed. Same governments were forced to narrow down their target to those most in need to ease the pressure on their pandemic-hit budgets.

  • Indonesia and Malaysia are reorienting subsidies to ease the financial burden. They face a financial burden after two years of big spending to weather Covid-19. The Philippines’ incoming president has proposed a similar plan.
  • Thailand is asking its oil industry to help fund fuel subsidies
  • India warns of the need to control some expenses

Inflation Pain

Asian economies face budgetary constraints even before prices rise. The Nomura analysts see spillover effects. Rising global food prices leading to food price inflation in Asia. It usually occurs with a delay.

The decline in fiscal support could not come at a worse time for the region. Inflation has yet to peak in Asia, according to economists at Nomura. Economists see risks of grunts and protectionism in the global supply chain. It is due to continued Covid-19 lockdowns in China and weaker harvests in India.

A worsening inflation outlook across Asia threatens disposable incomes and consumption. Disposable incomes and consumptions are already under pressure from interest rate hikes. Interest rate hikes cool and fights inflation.


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