Russia-ukraine war: Energy, commodity prices may rise in Asia

Escalating global geopolitical tensions arising from Russia's invasion of Ukraine could spill over to Asia through sharper-than-expected increases in energy and other commodity prices, said experts yesterday.

"There are several risk factors that really cloud the horizon despite our overall somewhat optimistic take on Asia's economy going forward," said Albert Park, chief economist of the Asian Development Bank, in a webinar hosted by the Asia News Network (ANN).

The Daily Star and the Philippine Daily Inquirer, both members of ANN, an alliance of 20 national media in 19 Asian countries, co-presented the webinar on the "impacts of food and energy crises on Asia" due to Russia's invasion of Ukraine.

It was the second of a series of webinars hosted by ANN on the Ukraine crisis.

In his presentation styled "Managing Asia's Economies during Troubling Times", Park said "aggressive tightening" by the US could trigger financial market volatility, capital outflows and currency depreciation, raising financial stability risks in the region.

The emergence of more deadly Covid-19 variants and China's current Omicron outbreak could jeopardise regional growth and supply chains.

Besides, scarring effects of learning losses from continued school closures and high youth unemployment rates could affect future productivity, he added.

Park, however, stressed that Asian countries need to continue investing in digitalisation, green energy and human capital to support sustained growth despite all other challenges that they are facing.

In the long term, if the Russia-Ukraine conflict affects the planting seasons in Ukraine, which seems quite likely, then the shortages of wheat, maze and corn could become more acute.

Eventually, it could also put price pressure on rice as some countries start to substitute rice consumption for other grain consumption, he added.

Asia is going to see a 5.2 percent GDP growth this year and 5.3 percent growth next year.

Besides, South Asian countries will see 7 percent growth this year and 7.4 percent growth next year, outperforming their East Asian and Southeast Asian peers.

Among the South Asian nations, Bangladesh will see 6.9 percent growth this year and 7.1 percent growth next year.

On the other hand, ADB's headline forecast on inflation in Asia is "modest", Park said.

To manage the challenges, each government needs to do a "balancing act", Park said.

On the one hand, governments want to support recovery, achieve sustainable development goals and support a green transition.

But at the same time, they are worried about elevated macroeconomic risks, he said.

If inflation stays modest as per the ADB's projection, some central banks in Asian countries might resist raising the interest rates.

However, that could lead to the depreciation of their currencies, Park added.

India can provide some answer to the concerns surrounding food grain supply, said Raimondo Serra, the EU's directorate-general for Agriculture and Rural Development for Asia and Australasia.

The neighbouring country is the world's second-largest producer of wheat but because of its population size, it is not a big player in the global market.

India accounted for less than 1 percent of global wheat exports in the past seven years, he said.

However, there has been a boom in Indian wheat exports between 2021 and 2022, he added.

Pauline Weil, research analyst at Brussels-based think-tank Bruegel; Anintita Praokaew, vice-president of PTT's international trading business unit; and Prinn Panichpakdi, chairman of the advisory committee to the Thai commerce minister, also spoke at the webinar.

ANN Executive Director Pana Janviroj moderated the event.