The rounds of stimulus injected by governments around the world to revive ailing economies has brought on the new problem of inflation.
However, several central banks around the world are seemingly sanguine and see this as a temporary phenomenon, observe Maybank Kim Eng economists Suhaimi Ilias, Chua Hak Bin, Zamros Dzulkafli and Lee Ju Ye.
Still, the experts have penciled “broadly faster inflation rates” across the Asean – 6 region next year.
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This follows “uncertainties and concerns over the transience or persistence of inflationary pressures that revolve around the impact of commodity price increases, supply chain bottlenecks and the demand effect of economic re-openings,” they explain.
The Asean – 6 region refers to Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.
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Presently, the inflation levels in these countries are at: -0.2% (Singapore), -1.2% (Malaysia), 2.0% (Indonesia), -0.8% (Thailand), 2.6% (the Philippines) and 3.2% (Vietnam). The experts are expecting the long-term average inflation levels in each of these countries to hit at least 1% or as high as 4%.
According to Illias, Chua, Dzulkafli and Lee, the biggest determinant of the inflation levels in the Asean – 6 countries is the extent of supply chain bottlenecks as well as commodity prices. Crude oil and food commodity prices will have a particularly deep impact, they elaborate.
The economists note that the “surge in energy/crude oil prices reflect what some considered to be “transient/seasonal” factors”.
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One such jump in the demand came from a greater need for power and heating in the Northern Hemisphere (especially Europe) due to the colder winter.
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For now, the experts say that recent OPEC+ (Organisation for Petroleum Exporting Countries Plus) decision to stick to its current 400,000bpd crude oil production until end-2022 “indicates that the current supply-demand mismatches are temporary, weather-related factors that will pass”. They add that this will follow a supply-demand re-balancing next year.
However, they also caution of a persistence in high or even rising energy/crude oil prices due to various policies addressing issues on sustainability, climate change and carbon dioxide emissions.
Cover image: file photo
