The unintended macroeconomic consequences of APAC energy rationing

Even with the ceasefire in the Middle East, the recovery in seaborne energy shipments is unlikely to be immediate. Cargoes leaving the Strait of Hormuz will need transit time, resulting in a delay before any additional supply reaches regional markets.

As such, we continue to expect a protracted period of interventionist government measures as energy shortages continue to bite.

These administrative measures impose significant macroeconomic costs that we think markets are underappreciating.

What you will learn:

• The policy response across Emerging Asia has tilted toward energy rationing and administrative controls – price caps, mobility restrictions, shortened working weeks. This is poorly suited to the economies using this policy playbook.
• High labour market informality results in lost working days and reduced mobility translating almost immediately into lower cash income and household consumption. Energy conservation may not come from efficiency gains, but rather from demand destruction.
• The country risks are already visible. Thailand’s travel curbs threaten a services sector still recovering from the pandemic; the Philippines’ shortened workweek would hit lower-income households hardest and risks social unrest; India’s LPG controls risk perverse hoarding that worsens the shortages they aim to fix.