High inflation cuts into growth rates . . .
Economic troubles in the Asia Pacific are expected to be exacerbated by the Ukraine conflict as oil prices surge and rapid inflation eats away at growth rates. While pandemic-related inflation concerns have gripped the West, Asia’s inflation remained low, as gradual reopenings did not result in a jump in demand from services to goods. But that is now expected to change due to rising costs of oil and food because of the Ukraine conflict. Some initial concerns over inflation were eased on Tuesday when the price of oil fell, and stock markets recovered slightly. However, sustained instability will continue to cause concern for central banks across the Asia Pacific. Asian markets are large net importers of energy, and while not as dependent on Russia as Europe, major economies like South Korea, Japan, and India will have to scramble to find alternatives. Oil prices are currently at a 14-year high, which will continue to affect exports and tourism.
Tourism sector longing for recovery . . .
Tourism-dependent countries in South and Southeast Asia hoped this season would be a recovery boom as COVID restrictions ease. Thailand, Indonesia, India, and the Maldives are popular destinations for Russian tourists, but cancelled flights between Europe and Asia, the suspension of visa services for Russian citizens, and a rock-bottom Ruble will likely keep tourists at home. Due to the rising cost of jet fuel and plane ticket prices, hopes of an influx of tourists appear to be wishful thinking, as other countries also face weakened currencies and inflation concerns.
No winners in a war . . .
Although some analysts have suggested that Chinese oil exports may benefit from the sanctions imposed on Russian oil and other exports, Beijing would prefer market stability over the current international turmoil. Market instability and disruption of global trade interfere with China’s bottom line due to a decline in export demand and further strain on global supply chains through higher fuel costs. Conversely, the West has unified against Russia with intense sanctions, which has forced Beijing to tread more carefully with its open support for Russia. China is more insulated from rising oil prices because of its domestic production, and inflation remains controllable, but demand for Chinese exports remains sluggish. Although Asia, compared to Europe, is better insulated economically, ultimately, Asian exports to Russia will decline due to the falling value of the Ruble in response to Western sanctions.
- Al Jazeera: In Thailand, businesses feel economic shock of Ukraine war
- The Diplomat: How the Russian invasion of Ukraine might impact ASEAN economies
- South China Morning Post: Asia-Pacific tourism recovery lags