Asian Economics Quarterly Still runnin’

Research evidence excerpt

Asian Economics Quarterly Still runnin’

Economics ● Asia

Q3 2026

Executive Summary

At last, some relief. The energy crisis delivered a powerful punch in

Asia, given the region’s reliance on crude, gas, and other materials

from the Gulf. True, most economies weathered the challenge with

remarkable aplomb, relying on fuel reserves, fiscal largesse, and deft

macroeconomic management to shield consumers and businesses

from the impact. Surging demand for AI hardware, which is boosting

demand well beyond Korea and Taiwan, the two central nodes in the

supply chain, as well as inventory front-loading, kept trade running

at a record pace. The drop in energy costs, if sustained, now blunts

the sting of inflation and defers the tricky fiscal decision on costly

subsidies. Alas, central banks cannot relax entirely: price pressures

in many places – though mainland China excepted – go well beyond

energy, from stretched supply chains to frothy food costs. In fact, a

severe El Niño looms ahead, bringing drought and excessive rainfall

to various parts of Asia, straining agriculture and impairing hydro-

power production. Moreover, in some economies, droopy currencies

are adding to the challenges. Still, Asia’s vaunted resilience will once

again be on display, trotting ahead, no matter the obstacles, with a

confident gait, in the Year of the Horse.

Pushing ahead

The headlines remain volatile, but prospects of a more lasting ‘deal’ between the US and Iran have

calmed market jitters. The resultant plunge in energy prices, if sustained, offers relief, especially

for Asian importers highly reliant on shipments through the Strait of Hormuz.

But risks remain. As Janet Henry, HSBC’s Global Chief Economist, notes in a recent report, it is