Food inflation in ASEAN – When oil shock meets El Niño

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Food inflation in ASEAN – When oil shock meets El Niño

Goldman Sachs Asia Economics Analyst

An additional complication is weather. The National Oceanic and Atmospheric

Administration (NOAA) has assessed that El Niño conditions are present, with forecast

models pointing to a meaningful risk of a very strong event around November 2026 to

January 2027. If realized, this would add another supply shock just as higher oil and

fertilizer costs are still passing through the food chain.

ASEAN is not uniformly exposed, but the region is vulnerable through several channels.

The region includes near-total food importers as well as major rice and palm oil

producers, while food carries a large weight in CPI baskets. In this report, we quantify

the potential impact on ASEAN food prices from three shocks: oil, fertilizer and El Niño.

ASEAN looks particularly vulnerable

ASEAN food inflation is highly synchronized. A simple principal component analysis

shows that the first common factor explains around 70% of the variation in food

inflation across the region, underscoring how regional food prices tend to move together

during major shocks.

Singapore and the Philippines are net food importers, leaving them directly exposed to

global food price shocks. Malaysia and Indonesia appear more insulated in aggregate,

but their food surpluses are largely a palm-oil story; excluding that component, both

become net food importers (Exhibit 1). Thailand is the only broad-based net food

exporter in the region. Even then, Thailand is still exposed to global food price shocks

through increases in food input prices, such as fertilizer, more than 90% of which

Thailand imports. The region’s main food commodity imports are cereals, meat and

dairy products.