Malaysian Investment Bank: Middle East Situation Puts Pressure on ASEAN Economy

The Malayan Investment Bank recently released a report stating that the current tense situation in the Middle East is spilling over to Asia through energy and supply chain channels, which could have a "stagflationary impact" on the ASEAN economy, dragging down growth and pushing up inflation. The report stated that ASEAN as a whole is highly dependent on energy from the Middle East, with the Philippines and Vietnam importing about 95% and 88% of their crude oil from the Persian Gulf, respectively. In terms of refined oil, Singapore, Indonesia, and Thailand have a high dependence on Middle Eastern diesel supply. In terms of natural gas, around 49% of Vietnam's natural gas comes from Gulf countries. The report believes that some ASEAN countries are also facing risks in terms of agricultural inputs. Around 67% of Thailand's nitrogen fertilizer and 74% of urea are imported from Gulf countries. If there are disruptions to energy and fertilizer supply, agricultural costs could rise, further transmitting to food prices. The report downgraded the overall economic growth expectations for ASEAN's six major economies, including Indonesia, Malaysia, the Philippines, Singapore, Vietnam, and Thailand, from 4.8% to 4.5% in 2026. The Philippines and Vietnam saw the biggest downward revisions, both by 0.4 percentage points. At the same time, the report projected that the overall inflation rate for the six countries in 2026 will rise from the previous forecast of 2.2% to 2.7%. Specifically, Thailand's inflation rate is expected to increase by 0.8 percentage points, while the Philippines and Indonesia are expected to increase by 0.5 percentage points. The report also stated that rising energy prices will exacerbate the current account deficits of energy net-importing countries in ASEAN, putting pressure on the depreciation of their currencies. Thailand and Singapore have relatively large deficits in oil and gas trade, while the Philippines and Indonesia are already in a deficit in their current accounts, further raising external risks.