‘Inflation jihad’, cash handouts: Can Singapore, Malaysia and other Asian countries soften the blow of rising prices?

Indonesia’s flirting with a wider budget bill to boost subsidies, while Malaysia has launched a ‘Jihad Against Inflation’ task force to tackle the crisis

Singapore’s confident it can keep inflation in check, but analysts warn the Philippines may tip into recession – as Thailand looks to tourism to save the day

Reading Time:10 minutes

A customer browses supermarket shelves in Bangkok. Global food prices are surging. Photo: Reuters

Joseph Sipalan,Aisyah Llewellyn,Kok Xinghui,Raissa RoblesandVijitra Duangdee

Published: 8:30am, 9 Jul 2022Updated: 5:06pm, 19 Jul 2022

Global food and crude oil prices are surging, and look set to stay high for some time yet, as the world’s wheat and energy supplies are put under immense strain by the combined effects of the Ukraine war and retaliatory sanctions on Russia.

In May alone, world food prices were up 22.8 per cent, according to the UN Food and Agriculture Organization’s Food Price Index – driven by an increase in cereal and meat prices.

The World Bank expects food prices to rise by about 20 per cent this year because of continued upwards pressure on energy and fertiliser costs that have persisted since early 2021, which will continue to push food costs higher if they do not moderate next year.

People browse meat for sale at a wet market in Shah Alam, Malaysia. Photo: Bloomberg

Benchmark Brent crude oil hit nearly US$140 a barrel in March and though it has since receded, traders expect prices to stay high amid tight supplies as oil-producing nations in the Opec+ cartel continue to miss monthly production targets. Researchers at Fitch Solutions expect Brent to average out at about US$105 per barrel this year – more than double what it was trading for at the end of 2020.

Fears of a global recession are also growing, as the US Federal Reserve prepares to increase interest rates by another 75 basis points in July – having already done so earlier this month – in a bid to slow domestic demand. Annual US inflation hit 8.6 per cent in May – its fastest rise in more than three decades, according to government data.

Southeast Asian economies have not been spared the effects of surging food and crude oil prices, and could yet feel more pain if a global recession hits just as they were seeing the first green shoots of a post-pandemic recovery.

Some may end up having to spend more than their annual budgets trying to mitigate inflation’s effects, analysts and experts say – particularly members of the Association of Southeast Asian Nations – potentially leading to widening budget deficits.