BNY's Geoff Yu reports that despite higher energy prices and stress in the gas market, key ASEAN economies have not been pushed into unsustainable external deficits [1]. Bank Indonesia (BI) is actively defending the Indonesian Rupiah (IDR) and focusing on strengthening the country's balance of payments, with the central bank describing its efforts to maintain IDR stability as 'all-out' [1]. BI's recent interest rate decision was in line with expectations, and the central bank emphasized that intervention will remain targeted while also stressing the need to strengthen the balance of payments to mitigate the impact from the ongoing war [1].
Indonesia's current account forecasts have been revised sharply downward, from a deficit of 0.5% of GDP to 1.3% [1]. BNY notes that every emerging market net energy importer, including Indonesia's Southeast Asian peers, will need to address balance of payments risks in their central bank decisions [1]. Despite these challenges, the core ASEAN economies—Indonesia, Malaysia, Thailand, Vietnam, the Philippines, and Singapore—currently run a combined rolling six-month trade surplus of around $25 billion, with Singapore accounting for 60% of this figure due to its unique trade patterns [1].
The report suggests that the net shortfall remains manageable, especially when compared to reserve levels, though there is concern about the pace of reserve drawdown, which could lead to significant market volatility [1]. BNY advocates for the use of reserves as a smoothing mechanism and recommends that balance of payments corrections should primarily occur through demand-side adjustments and fiscal measures to restrain activity, even though fiscal policy falls outside the remit of local central banks [1].
CONCLUSION
ASEAN economies are currently managing external pressures from higher energy prices without falling into unsustainable deficits, supported by trade surpluses and central bank interventions. However, risks remain regarding the pace of reserve drawdown and the need for ongoing policy adjustments. Market volatility may persist, but the situation is considered manageable given current buffers.