El Nino Fuels Food Inflation Alarms Across ASEAN

The El Nino weather phenomenon is causing food inflation alarms to ring across ASEAN countries. According to OCBC Group Research, El Nino is forcing up prices of rice, wheat, corn, and vegetable oil. The countries most vulnerable to this impact are the Philippines, Indonesia, and Thailand, while Malaysia and Vietnam face significant but more concentrated risks.

Lavanya Venkateswaran, senior economist for ASEAN and India, believes that rising food prices can add to regional inflationary pressures, particularly since most of these countries are net food importers. She notes that the majority of economies in the region are large net importers of grains and are highly vulnerable to inflationary pressures originating abroad.

The impact on growth is expected to be uneven and largely concentrated in the agricultural sector. Countries with relatively large agricultural sectors, such as Indonesia, the Philippines, Thailand, and Vietnam, are at higher risk of declining production and weakening rural incomes. However, these countries can partially offset the impact through increased commodity export revenues.