KUALA LUMPUR, March 9 — Following the surge in global oil prices on March 9, Asian governments face heightened fiscal and inflationary risks from rising global oil prices as the region remains structurally dependent on energy imports, said OCBC.
The Asia Pacific region remains a net importer of crude oil, natural gas, and coal, leaving regional economies exposed to external energy shocks.
The International Energy Agency's (IEA) data showed that the Asia-Pacific region remained a net importer of these energy commodities through 2023.
This indicates that the region’s economies would still rely on oil, coal, and natural gas as key sources of energy.
"Higher oil prices reverberating across other commodities, especially natural gas, further exacerbate the risk from an energy price shock," it said in its Global Markets research note today.
OCBC added that Asia remains reliant on the Middle East for energy imports. Singapore, Thailand, South Korea, India, and Vietnam import a relatively substantial share of petrol and gas from the Middle East.
Indonesia, while classified as a net energy exporter given its status as a net coal exporter, still imports 11 per cent of total petrol and gas imports from the region.
The bank noted in its base case that Brent crude prices are expected to fall below US$70 per barrel by mid-2026.
However, in a 'moderately severe' scenario where energy flows partially resume under military escort, Brent could remain around US$100 per barrel through mid-year, then ease as global supply stabilises.
In an 'acute’ scenario involving a prolonged halt, Brent prices could surge to around US$140 per barrel and remain elevated through mid-year.
Sustained higher energy prices would likely weaken the trade balance across Asian economies, with trade surpluses narrowing and deficits widening. Inflationary pressures would also intensify, particularly in economies without retail fuel subsidies.
The Philippines and India could see noticeably wider trade deficits and higher headline consumer price inflation than in baseline forecasts.
Indonesia and Malaysia are expected to face wider fiscal deficits as governments absorb higher subsidy costs.
Meanwhile, the fiscal impact for China and the Philippines is expected to be more muted, while Thailand and Vietnam have cross-subsidy oil funds that could cushion the fiscal effects in the near term.
