Some of the worst-hit countries are Pakistan, India, Philippines, Thailand and Indonesia, where inflation rates have exceeded their central banks’ targets and eroded the purchasing power of consumers.
Pakistan’s consumer price inflation jumped to 31.5% in February of 2023, the highest rate since June of 1974, following a sharp depreciation in the rupee and as the government announced a rise in energy prices and taxes to meet the International Monetary Fund’s loan conditions. India’s inflation rate rose to 6.3% in January of 2023, above the Reserve Bank of India’s upper limit of 6%, as food and fuel prices soared amid supply bottlenecks and rising global commodity prices.
In Southeast Asia, inflation has also accelerated due to rising food and energy costs, as well as the impact of natural disasters and lockdowns on agricultural production and distribution. The Philippines’ inflation rate climbed to 5.8% in January of 2023, the highest since February of 2019, as food prices surged by 9.7%, especially for meat, fish and vegetables.
Thailand’s inflation rate reached 4.1% in January of 2023, the highest since November of 2014, as transport costs increased by 12.7%, mainly due to higher fuel prices.
Indonesia’s inflation rate rose to 3.6% in January of 2023, the highest since June of 2019, as food prices increased by 5%, especially for rice, chili and cooking oil.
Governments are racing to soften the blow for consumers. They have raised the minimum wage (in Laos and the Philippines), doled out cash to the poor (Singapore, Malaysia, Indonesia), and subsidised fuels or fertiliser (Indonesia, Malaysia, Philippines, Thailand). However, these measures may not be enough to contain the inflationary pressures and may also worsen fiscal deficits and debt burdens. Some analysts have called for more monetary tightening and structural reforms to address the underlying causes of inflation and improve productivity and competitiveness.