Research Briefing | Apr 12, 2022

Asia’s food inflation to peak in Q3, but not at alarming levels

Muted food inflation was one of the reasons why the rise in Asia’s consumer inflation lagged the rest of the world in 2021. With an aggregate weight of 26% in the CPI basket, food plays a key role in influencing Asia’s consumer inflation. So, it’s hardly surprising that the impact of the war in Ukraine on global agriculture markets has stoked inflation worries in the region.

What you will learn:

  • Food inflation in Asia ex-China has risen 2.7ppts to 4.5% since October 2021. We expect the uptrend to continue into Q2, and perhaps even early Q3 for some economies.
  • Other than China, whose record grain stocks position it well to absorb global price shocks, net food importers will feel the global price pressures more. This includes all of advanced Asia, and the Philippines. What’s more, some net food exporters – such as Indonesia and Thailand – will also experience price pressures, because they depend heavily on imports of war-impacted crops to meet their domestic requirements.
  • Still, we do not forecast runaway inflation anywhere in Asia and expect the surge in global food prices to ease from Q3. True, prices will not fall back to pre-war levels anytime soon. But we expect Asian governments to prevent food prices from rising unchecked, meaning Asia’s inflation headaches are likely to remain milder than in the West.

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