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Eye on Asia | How rising energy prices are pushing up inflation across Asean and East Asia
- As prices of oil, gas and coal surge, net energy-importing countries in Southeast Asia are having trouble keeping inflation down, despite fiscal measures
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Since the start of the Russia-Ukraine war in February, global prices of crude oil and natural gas have risen to their highest in more than a decade, and the price of coal has hit an all-time high. These soaring energy prices are pushing up inflation rates across the United States, Europe and many emerging economies.
In the Asean+3 region, which comprises the Association of Southeast Asian Nations plus China, Japan and South Korea, the headline consumer price index (CPI) in some economies has risen to multi-year highs too, mainly driven by surging oil prices.
Oil price shocks contribute significantly to inflation in the Asean+3 region. Our estimates suggest that a 10 per cent year-on-year increase in global oil prices could push up the region’s headline CPI by about 0.2 percentage points in the first year.
As oil shocks could mean price increases of more than 50 per cent year on year, the region’s inflation rate could easily rise by more than a percentage point over 12 months.
The impact of oil price shocks varies across Asean+3, where most economies are net energy importers. Only five are net energy exporters: Brunei (petroleum products and natural gas), Indonesia (mostly coal), Malaysia and Myanmar (mostly natural gas); and Laos (mostly hydropower).
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