Geopolitical risks cast a pall over Indian and other Asian economies
Asian bonds have become less attractive for investors. The premiums a borrower pays to own Indian or Indonesian bonds against US debt, hitting the lowest level since the global financial crisis (GFC) in 2008.
Brent crude prices have soared nearly 20% in the past three months. According to Bloomberg Economics, prices could surge as high as $150 a barrel, from about $90 now, if the Middle East conflict furthers to include Iran.
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Asian bonds have become less attractive for investors. The premiums a borrower pays to own Indian or Indonesian bonds against US debt, hitting the lowest level since the global financial crisis (GFC) in 2008.
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The jump in both the dollar and long-term Treasury yields is only adding to the headwinds for economies with high current-account deficits.
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One country that stands to benefit from rising oil prices is Malaysia, in terms of both growth and the nation’s fiscal position, economists believe.
Economists, however, expect some positives for India despite the higher dollar and skyrocketing crude prices. Natixis’ Garcia Herrero is optimistic about the nation's strong macroeconomic data that makes India's assets attractive amid the turbulence. “The fact that Indian data has been so strong — the latest PMI was the best in Asia — does help India,” Herrero has been cited in a Bloomberg report.
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The fallout on developing Asia from a widening of the Israel-Hamas war has been sending jitters among economists. Policymakers have been finding it difficult to assess the consequences for oil supply and the scope of the potential impact on growth.
