OCBC warns Thailand faces highest inflation risk from El Niño in ASEAN

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OCBC Group Research expects the El Niño phenomenon to expose ASEAN countries to greater inflation risk than to an economic slowdown, with higher prices for rice, wheat, corn and vegetable oils set to be key factors weighing on their economies. Lavanya Venkateswaran, a senior economist for ASEAN and India affairs at OCBC, said in a report published on September 9 that the Philippines, Indonesia and Thailand are the ASEAN countries at high risk from El Niño, while Malaysia and Vietnam face significant risk as well, though of a more concentrated kind. She said that apart from Thailand and Vietnam, most major economies in the region are net rice importers, leaving the Philippines, Malaysia and Indonesia exposed to terms-of-trade effects from higher rice prices, and noted that most of the ASEAN-6 are large net importers of grains, making them especially vulnerable to imported inflation pressures when wheat and corn prices rise on world markets. The impact on economic growth is expected to be concentrated in the agricultural sector, with Indonesia, the Philippines, Thailand and Vietnam, which have large agricultural sectors, vulnerable to lost output and lower rural farm incomes, while agricultural exporters such as Indonesia, Malaysia, Thailand and Vietnam may receive some offset from higher commodity export earnings.

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