South-east Asian economies struggle to counter energy shock

{"text":[[{"start":10.3,"text":"Oil-poor south-east Asian countries are stepping up efforts to counter the deepening economic impact of the war in the Middle East as an energy crisis drives up inflation, undermines currencies and threatens livelihoods."}],[{"start":23.65,"text":"Policymakers across the region, which is heavily reliant on oil supplies that have been choked off by the US-Israeli war on Iran, stepped up efforts this week to respond to the conflict beyond subsidising fuel costs and trying to reduce demand. "}],[{"start":37.7,"text":"Indonesia, south-east Asia’s largest economy, raised its main policy interest rate by a hefty 50 basis points to 5.25 per cent — its first increase in two years — even as consumer price inflation has fallen sharply in the past few months. The central bank said the rise was needed to shore up the rupiah and as a “pre-emptive measure” to keep price rises under control."}],[{"start":61.1,"text":"In Thailand, the region’s second-largest economy, the government approved a Bt176bn ($5.4bn) “Thai Help Thai Plus” package of cash aid and other benefits for millions of people to mitigate the impact of higher costs, as officials warned that prolonged inflationary pressures could force smaller companies to cut jobs or close."}],[{"start":84,"text":"“This is a cost-of-living crisis affecting the majority of the population,” said Thai finance minister Ekniti Nitithanprapas. “The government’s objective is . . . to provide temporary relief to households and help small businesses survive during a period of weakening domestic purchasing power.”"}],[{"start":101.4,"text":"South-east Asian economies, many of which were already suffering sluggish growth and strained budgets before the war, are facing intense pressure as the conflict drags on. Currencies and bond yields of import-dependent countries have also come under pressure."}],[{"start":null,"text":"

"}],[{"start":null,"text":""}],[{"start":117.05000000000001,"text":"“If the Iran war continues and the Strait of Hormuz remains closed, then it’s increasingly likely that we will see more governments take action to address inflation effects or balance of payment strains,” said Jason Tuvey, an emerging markets economist at Capital Economics. "}],[{"start":133.25,"text":"“The risk of energy shortages is clearly growing, and that’s where governments will have to find ways to dampen demand,” Tuvey said. "}],[{"start":140.35,"text":"Indonesia, Thailand, Vietnam and the Philippines have already taken steps aimed at reducing fuel demand, encouraging remote work, cutting back official state travel and cancelling some flights. "}],[{"start":153.15,"text":"Protests have also erupted over higher costs. In Indonesia, fishermen held demonstrations this month demanding the government reduce diesel prices, which some say they can no longer afford, preventing them from going out to sea. In the Philippines, transportation drivers have held protests. "}],[{"start":null,"text":""}],[{"start":171.6,"text":"The Philippines, which relies on the Middle East for 95 per cent of its oil supply, was the first in the region to raise interest rates in April. Its central bank said prices of food items such as rice, fish and meat had increased due to higher oil and fertiliser prices and the inflation outlook had deteriorated. The bank is considering further rises, the governor said this week."}],[{"start":192.6,"text":"The currencies of Indonesia and the Philippines are among the worst performers in Asia this year and have both been trading at record lows. The Philippine peso has fallen 4.66 per cent against the US dollar in 2026, while the Indonesian rupiah is down 5.75 per cent. "}],[{"start":null,"text":""}],[{"start":211.45,"text":"Both countries are now struggling to stop a vicious cycle of weakening currencies and selling pressure on their government bonds. Falling currencies make imported energy more expensive, which in turn raises the costs for governments looking to shield citizens from the impact of higher energy prices. "}],[{"start":227.75,"text":"Ten-year bond yields, which move inversely to prices, have soared across developing south-east Asia in recent weeks. Benchmark bond yields in the Philippines have risen 1.79 percentage points, the largest jump in the region. "}],[{"start":240.95,"text":"Eric Robertsen, head of global research at Standard Chartered, noted there was a clear “dividing line” in how the energy shock was hitting south-east Asia compared with northern Asian countries such as South Korea and Taiwan that were also big oil importers but had greater financial resources."}],[{"start":258.84999999999997,"text":"“What is very clear is a strong differentiation of performance within Asia in reaction to the crisis in the Gulf,” he said."}],[{"start":265.34999999999997,"text":"HSBC’s chief Asia economist Frederic Neumann said growth in much of the region would come under greater pressure as the broader price impact began to be felt. Governments could be forced to remove fuel subsidies or cut other spending, he said. "}],[{"start":280.24999999999994,"text":"“Even if the Strait of Hormuz reopens soon, the consequences of its closure will reverberate through Asian economies for months to come,” Neumann said."}],[{"start":289.09999999999997,"text":"Data visualisation by Haohsiang Ko in Hong Kong"}],[{"start":300.4,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779594962_2139.mp3"}