Geopolitical shocks may hurt emerging Asian economies such as India, Indonesia, feel experts

Alicia Garcia Herrero at Natixis SA, a French investment bank, said India and Indonesia are vulnerable “since they tend to run current-account deficits and need external financing for that”.

• Shubham
• 16 October, 2023

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By: Shubham Ghosh

HIGH oil prices, surging dollar and geopolitical instability could weigh on emerging Asian economies such as India and Indonesia while Malaysia, an energy exporter, could see it among the rare beneficiaries, Bloomberg has reported.

Both economists and policymakers are spending worried days over the fallout of the ongoing war between Israel and Palestine, particularly in Asia. The policymakers are still not clear over the war’s possible consequences for oil supply and the potential impact of the war on growth.

“The jump in both the dollar and long-term Treasury yields exacerbate the risks for economies running high current-account deficits,” the Bloomberg report added.

Prices of brent crude have gone up by almost 20 per cent in the past three months and as per a Bloomberg Economics estimate, they could soar to $150 a barrel, from about $90 now, in case the Middle East conflict widens to include countries such as Iran, known to be hostile to Israel. Tehran supplies arms and cash to Hamas, an outfit that the US and European Union designate as a terrorist outfit and supports Lebanon-based Hezbollah.

The conflict between Israel and Hamas, which has already killed several thousands, comes on top of the war between Russia and Ukraine, which is nearly two-year old now, and the simmering tensions between the US and China.

“If higher oil prices persist for a prolonged period, we see India, Thailand, the Philippines, Indonesia more vulnerable to terms of trade deterioration,” Lavanya Venkateswaran, a senior economist at Oversea-Chinese Banking Corp Ltd, was quoted as saying by Bloomberg.

Alicia Garcia Herrero at Natixis SA, a French investment bank, said high external debt positions mean India’s neighbouring countries such as Sri Lanka and Pakistan are most at risk. She said India and Indonesia are vulnerable “since they tend to run current-account deficits and need external financing for that”.