A 10 percent increase in oil prices could add 0.4 percentage points to inflation in India and the Philippines, and 0.3 percentage points in Thailand, as transportation and utility costs rise, analysts wrote.
India is expected to suffer the biggest blow to economic growth, which will pull it down by 0.2 percentage points, while the Philippines and Thailand will see a hit of 0.1 percentage points.
The beneficiary will be a relative of commodities giant Indonesia, which has a 0.05 percentage point growth boost due to its exports of palm oil, gas and coal.
“Most consumers in Asia have not yet fully recovered from the pandemic and have lower savings, so higher inflation could squeeze into real disposable incomes and weaken the beginning recovery of consumption,” he said. said Nomura. “We also see risk in the company’s profit margins, as the full burden on input costs is unlikely to be passed on to consumers.”
While escalating Russia-Ukraine tensions have pushed Brent oil by about $ 100 per barrel, it would be a “mistake” to ignore other factors that could cause longer price increases, such as resumption. of travel demand and insufficient investment in fossil fuels, according to the report.
This has a knock-on effect on food prices due to more expensive gas, fertilizer and feedstock, which is not a good indication for Asian economies as a whole.
Nomura expects central banks in developed Asia to tighten policies to eliminate the threat to their recovering economies. Others are likely to prioritize the still weak growth, which will see hiking rates in Indonesia and the Philippines later this year while Thailand remains on hold.
India, which has repeated its dovish signals, could see inflation “surprisingly certain” at 5.8 per cent in 2023 against the central bank’s 4.5 per cent forecast, Nomura said. It could force a pivot in June and a 100 basis cumulative repo rate hike in 2022.