RCEP Monitor

SOUTH KOREA, INDIA
India and South Korea agree to double bilateral trade to USD 50 billion by 2030
(21 April 2026) India and South Korea agreed to expand economic cooperation across energy, critical minerals, shipbuilding, semiconductors and steel, with a target to double bilateral trade to USD 50 billion by 2030 from about USD 27 billion currently. The countries will resume and accelerate negotiations to upgrade their 2010 trade agreement, focusing on balancing trade and improving market access, including easing non-tariff barriers and rules of origin. South Korean President Lee Jae Myung, on an eight-year first state visit to India, held talks with Prime Minister Narendra Modi and was accompanied by around 200 business representatives. Both sides established a new ministerial-level economic cooperation committee and agreed to strengthen collaboration in nuclear power, clean energy, trade and investment. Energy security cooperation will be prioritised amid supply disruptions linked to the Iran war, including coordination on key inputs such as naphtha. The trade ministers of both countries agreed to fast-track trade pact discussions and expand cooperation in industry, green energy and digital trade. A joint business forum highlighted potential synergies between India’s AI capabilities and South Korea’s manufacturing sector, alongside new opportunities in shipbuilding. POSCO Holdings announced plans to invest about USD 1.09 billion by end-2031 in a joint venture with JSW to build a 6-million-ton-per-annum steel plant in Odisha. South Korea recorded a USD 12.8 billion trade surplus with India last year, with exports of USD 19.2 billion and imports of USD 6.4 billion, underscoring India’s concerns over trade imbalance.

NEW ZEALAND
Annual inflation remains unchanged at 3.1% in Q1, above central bank’s target range
(21 April 2026) New Zealand’s annual inflation remained unchanged at 3.1% in Q1, exceeding expectations of 2.9% and staying above the Reserve Bank of New Zealand’s 1%–3% target range. The consumer price index rose 0.9% quarter on quarter, compared with forecasts of 0.8%. Financial markets reacted with the New Zealand dollar rising 0.4% to USD 0.5916 and two-year swap rates increasing 5 basis points to 3.3951%. Interest rate swaps now indicate a 42% probability of a 25 basis point rate hike in May, up from below 30% previously, against the current 2.25% cash rate. The RBNZ had forecast 3% inflation for the quarter, with expectations of a rise to 4.2% in Q2 driven by higher oil prices linked to the Middle East conflict. Electricity prices, up 12.5%, were the largest contributor to inflation and accounted for more than a tenth of the annual increase, marking the third consecutive quarter as the main driver. ANZ noted the data showed no progress on non-tradable inflation and could raise concerns about inflation expectations, although it provided limited new insight into persistence. The central bank has signalled readiness to tighten policy if inflation accelerates further, while warning that the conflict may increase inflationary pressures and weigh on growth.

AUSTRALIA, CHINA
China approves more export licenses for Australian beef facilities
(21 April 2026) China approved export licences for eight additional Australian beef facilities, including six cold stores and two abattoirs such as Thomas Foods International in South Australia, according to the General Administration of Customs of China. It also upgraded 13 existing Australian abattoir licences to allow exports of chilled beef, increasing total new or enhanced licences to 15 and more than doubling prior capacity for chilled exports. Australia exported 272,940 tonnes of beef to China in 2025. The approvals come despite China imposing a 205,000-tonne import quota on Australian beef this year, after which a 55% tariff applies, with the quota expected to be filled by mid-June. Analysts noted the timing as inconsistent with existing trade restrictions. Global AgriTrends indicated the licence changes enable greater chilled beef exports and may reflect supply constraints in China. China’s agriculture ministry confirmed foot-and-mouth disease outbreaks in Xinjiang and Gansu in March, affecting 142 of 513 cattle in one location and 77 of 5,716 cattle in another, with containment measures implemented. Reports of broader outbreaks and reduced access to US beef were cited as possible factors tightening domestic supply. The Australian government stated the expanded access reflects recognition of product quality and safety. Industry participants noted increased demand but did not confirm links to disease outbreaks, while highlighting broader food security concerns amid global uncertainty.

MALAYSIA
Malaysia records 47% increase year-on-year in retrenchments in first quarter of 2026
(15 April 2026) Malaysia recorded 24,100 retrenchments in the first quarter of 2026, a 47% increase from about 16,500 in the same period of 2025, based on data from the Social Security Organisation analysed by Hong Leong Investment Bank. Layoffs peaked at 10,700 in January before declining to 7,500 in February and 5,900 in March, indicating an initial surge followed by moderation but still elevated levels overall. Manufacturing was identified as the most exposed sector due to reliance on global trade and external demand, with additional job losses in wholesale and retail trade and logistics. The bank characterised manufacturing as the “weakest link” in the labour market amid global economic uncertainty and geopolitical tensions. Retrenchments were concentrated in the Klang Valley, with Selangor accounting for 29.3% and Kuala Lumpur 25.6% of March layoffs, exceeding half of national totals. Kuala Lumpur’s share reached 38% in February, reflecting early impact of corporate restructuring in major urban centres. Outside the Klang Valley, Penang and Johor remained at higher risk due to dependence on export-oriented industries, including electrical and electronics and trade-linked sectors. Despite increased layoffs, the unemployment rate held at 2.9% for four consecutive months, according to the OpenDOSM Labour Market Dashboard. Job vacancies rose to about 107,000 in March, indicating continued hiring activity, particularly in services and construction. The contrast with 2025 reflects weaker manufacturing conditions and reduced semiconductor demand. Hong Leong Investment Bank assessed the retrenchment trend as part of an adjustment phase under uncertain global conditions and warned that export-driven sectors remain exposed to downside risks.

VIET NAM
Viet Nam and China signs multiple cooperation agreements during To Lam’s visit to Beijing
(15 April 2026) To Lam met Xi Jinping in Great Hall of the People on 15 April, marking Lam’s first overseas visit since assuming the presidency, and both sides signed multiple cooperation agreements without disclosed details. Lam identified relations with China as a “strategic priority” and “top priority”, calling for a shift from expanding trade volumes to deeper integration across development strategies, supply chains, production networks and infrastructure. The engagement reflects Viet Nam’s effort to strengthen ties with China while balancing its economic relationship with the United States, its main export market. Bilateral trade data shows Chinese exports to Vietnam rose 22.4% last year, with Viet Nam importing USD 198 billion in goods, while Chinese imports from Vietnam declined 0.7%, resulting in a trade deficit of nearly USD 100 billion for Hanoi. The discussions occur amid global trade disruptions linked to tariffs under Donald Trump and supply risks associated with halted shipping through the Strait of Hormuz due to the US-Israeli conflict with Iran. Viet Nam and China both rely on this route for oil imports, adding pressure to secure economic stability. Lam stated that geopolitical rivalry between the United States and China poses a constraint on Viet Nam’s target of achieving double-digit growth over the next five years.

VIET NAM, ITALY
Viet Nam and Italy call for expanding cooperation in trade and investments
(16 April 2026) The Italy–Vietnam Joint Commission on economic and trade cooperation, co-chaired by Italy’s Undersecretary of Foreign Affairs and Viet Nam’s Deputy Minister of Industry and Trade, focused on expanding collaboration in trade, industry, investment, energy transition and agriculture, including negotiations to open new product markets and enhance cooperation in mechanisation and food processing. Bilateral trade reached EUR 6.7 billion in 2025, an increase of 9.2% year-on-year, making Viet Nam Italy’s largest trading partner in ASEAN, while Italy remains Viet Nam’s third-largest partner within the EU. The Italian Undersecretary emphasised the need for balanced trade growth, stronger intellectual property protection and improved market access for Italian companies through continued dialogue to address sector-specific issues. A memorandum was signed for the Red River II project, financed by the Italian government with a EUR 2.86 million soft loan, aimed at improving management of the Red River hydroelectric basin through a monitoring and decision-support platform. The project includes new installations and upgrades to existing infrastructure across multiple sites to support energy system management.

INDONESIA, AUSTRALIA
Australia to import 250,000 tonnes of agricultural-grade urea from Indonesia
(16 April 2026) Australia will import 250,000 tonnes of agricultural-grade urea from Indonesia under a government-facilitated deal to offset supply disruptions linked to the Iran conflict. Incitec Pivot Fertilizers Ltd. will procure the volume from PT Pupuk Indonesia Holding Co., covering about 20% of Australia’s remaining urea requirements for the winter cropping season, including wheat, barley and canola. Incitec’s president stated the additional supply would help stabilise availability for farmers. Fertiliser prices in parts of Australia have doubled since the conflict, with around 60% of normal urea supply routes affected by the disruption of the Strait of Hormuz. Supply constraints have led some farmers to shift towards less fertiliser-intensive crops, potentially reducing wheat output. Indonesia reported a surplus of 1.5 million tonnes of urea, enabling exports, with interest also expressed by countries including India, the Philippines and Brazil.

THAILAND
Foreign investors flee Thai equities and bonds in March in largest outflow since October 2024
(16 April 2026) Foreign investors have reduced exposure to Thai assets following the Middle East conflict, with net equity outflows of USD 823 million and bond outflows of USD 705 million in March, marking the largest combined outflow since October 2024, reversing inflows of USD 1.7 billion recorded in February. The shift coincides with rising oil prices nearing USD 100 per barrel, increasing pressure on Thailand, which sources nearly half of its oil and gas from the Middle East. The economic outlook has weakened despite earlier optimism linked to the election of Prime Minister Anutin Charnvirakul, with analysts citing an energy shock as a near-term headwind. Thailand’s economy remains fragile, with growth at 2.4% last year and deflation preceding the conflict, while public debt stands at 66% of GDP, close to the 70% ceiling. Inflation is projected to rise to as much as 3.5% this year, compared to a 0.54% contraction in the first quarter. The central bank faces constrained policy options, with limited scope to tighten without harming growth or ease further due to inflation risks. Energy exposure is elevated, as over half of power generation relies on gas and increasing liquefied natural gas imports. The Thai baht has depreciated about 2.8% since the conflict began, although it has partially recovered following a ceasefire. Authorities have ruled out fuel subsidies but are absorbing costs to stabilise electricity tariffs, while concerns persist over fiscal limits and potential pressure to raise the debt ceiling. Analysts warn prolonged high energy prices could reduce consumption, weaken exports and tourism, and further strain economic recovery.

THE PHILIPPINES
Fuel prices in the Philippines more than double since Iran conflict began
(16 April 2026) Fuel prices in the Philippines have more than doubled since the Iran conflict began on 28 February, with over 90% reliance on Middle Eastern fuel exposing the economy to supply shocks and volatility. The Philippines’ Energy Secretary stated diesel prices may not return to 60 pesos per litre due to structural damage to Gulf oil facilities, indicating prolonged supply constraints and slower price declines. The blockade of the Strait of Hormuz has yet to fully impact supply, suggesting further price pressures. Economists assessed that sustained declines to pre-pandemic price levels are unlikely due to geopolitical risks and structurally higher energy costs, although recent oil price easing to about USD 96 per barrel and peso appreciation may moderate near-term inflation. Consumer groups criticised the government’s stance and called for stronger intervention, including tighter control over pump prices and reforms to the 1998 deregulation law, which limits price controls. Economists indicated direct price controls are not viable, recommending targeted subsidies, temporary tax relief, transport support and stricter monitoring instead. The government has introduced a subsidy of 10 pesos per litre, but concerns remain over its adequacy and implementation complexity. Proposals to remove fuel taxes, estimated at 22 to 25 pesos per litre for diesel, could provide immediate relief but would reduce fiscal revenues for social programmes. Analysts highlighted risks that persistently high fuel costs could sustain inflationary pressure and burden consumers, particularly in transport-dependent sectors.

RCEP Monitor

SOUTH KOREA
South Korea records record 4.76 million foreign tourist arrivals in first quarter of 2026
(16 April 2026) South Korea recorded 4.76 million foreign tourist arrivals in the first quarter of 2026, a 23% year-on-year increase and the highest first-quarter total on record, according to the Ministry of Culture, Sports and Tourism. March arrivals reached 2.06 million, up 27% from 1.61 million a year earlier, marking a new monthly record. Chinese visitors led with over 1.45 million arrivals, rising 29%, followed by Japan with 940,000 arrivals, up 20.2%, while Taiwan recorded the fastest growth at 540,000 visitors, up 37.7%. Long-haul markets including the United States and Europe contributed 690,000 visitors, increasing 17.1%. Cruise tourism expanded significantly, with 338 ship calls at ports such as Jeju, Busan and Incheon, up 52.9% year-on-year. Regional dispersion improved, with arrivals via regional airports rising 49.7% and the share of visitors travelling outside Seoul increasing to 34.5%, up 3.2 percentage points. Foreign card spending rose 23%, and visitor satisfaction reached 90.8 points. The upcoming BTS performance supports the revised 2026 target of 23 million visitors, up 21.4% from 18.94 million in 2025. Policy measures included expanded eligibility for five- and 10-year multiple-entry visas for nationals from 12 countries and an increase in automated immigration clearance coverage from 18 to 42 countries. Additional steps included expedited immigration screening for conference participants and coordination with Korea Railroad to improve regional access. Officials noted risks from rising airfares linked to higher fuel costs and uncertainty in global travel demand.

JAPAN
Japan pledges USD 10 billion in financial support for Asian countries amidst oil crisis
(16 April 2026) Japan pledged USD 10 billion in financial support to Asian countries, particularly in Southeast Asia, to secure crude oil and petroleum supplies amid disruptions linked to the Iran conflict. Prime Minister Sanae Takaichi announced the initiative following an online meeting with regional leaders, outlining a framework to support fuel procurement, maintain supply chains and expand stockpiles. The funding, equivalent to roughly one year of crude oil imports for Association of Southeast Asian Nations members, will be sourced from institutions including the Japan Bank for International Cooperation, Nippon Export and Investment Insurance, Japan International Cooperation Agency and the Asian Development Bank. The initiative was endorsed by leaders from countries including the Philippines, Malaysia, Singapore, Thailand, Viet Nam, Bangladesh and South Korea. The move responds to heightened regional vulnerability, with nearly 90% of oil and gas shipments through the Strait of Hormuz destined for Asia. Japan confirmed the plan would not affect domestic supply, noting reserves sufficient for 254 days of consumption, although 50 days of oil have already been released with a further 20 days planned. Concerns persist over potential shortages of naphtha, a key petrochemical used in medical supplies, which could affect healthcare systems. Regional governments have introduced conservation measures, while the Philippines declared a national energy emergency and President Ferdinand Marcos Jr called for activation of an ASEAN fuel-sharing mechanism.

NEW ZEALAND, AUSTRALIA
New Zealand and Australia impacted by fertilizer supply disruptions linked to Middle East conflict
(16 April 2026) Fertiliser supply disruptions linked to the Middle East war and China’s export restrictions are exposing reliance risks for New Zealand and Australia, both of which depend heavily on imported fertiliser for agricultural output and exports. Fertiliser production is concentrated in a small number of countries, with over 80% of countries importing at least 75% of their needs, increasing exposure to shocks in trade routes and supply chains. The Strait of Hormuz, which carries around a quarter of global seaborne oil, gas and fertiliser, is identified as a key vulnerability due to conflict-related disruption risks. Gulf states including Iran, Qatar and Saudi Arabia supplied 36% of global urea exports between 2023 and 2025, while China’s export restrictions have further tightened global availability. Rising natural gas prices have increased urea costs, contributing to higher food price pressures. International agencies, including the International Monetary Fund, International Energy Agency and World Bank, have warned that fertiliser market disruptions could threaten food security and increase inflation ahead of planting seasons. Industry and policy groups in Australia and New Zealand have called for fertiliser taskforces, strategic reserves and supplier diversification. Proposed alternatives include biofertilisers and local production of urea using green hydrogen, including projects such as the Kapuni initiative scheduled for 2027. Fertiliser price spikes following COVID-19 and the Russia-Ukraine conflict are cited as previous indicators of systemic vulnerability. Agricultural stakeholders argue that the absence of a coordinated national food and fertiliser strategy leaves both countries exposed to repeated supply shocks and rising costs.

VIET NAM
Viet Nam’s GDP slows to 7.8% year-on-year in Q1 2026 amidst energy crisis
(06 April 2026) Viet Nam’s GDP grew 7.8% year on year in Q1 2026, exceeding the 7.1% recorded in Q1 2025 but below both the 9.1% quarterly target and the 8.46% achieved in Q4 2025, according to the National Statistics Office. Achieving the government’s full-year target of at least 10% growth would require quarterly expansion of 10.5% in Q2, 10.6% in Q3, and 10.74% in Q4, contingent on stabilisation of Middle East conflict and energy prices. The global energy crisis significantly impacted performance, with Viet Nam importing over 80% of crude oil from the Persian Gulf and facing sharp fuel cost increases. March CPI rose 4.65% year on year, the fastest pace in five years, driven by gasoline prices rising 29.72%, diesel 57.03%, kerosene 62.35%, and gas 5.56%. It is believed that inflation could increase by an additional 1–2 percentage points, challenging the government’s 4.5% cap. Energy reliability emerged as a key investment constraint, with investors now requiring verified power allocation, grid upgrades, and infrastructure timelines before committing capital. The government introduced measures including a 10% electricity consumption reduction target until July, tax cuts on energy products, increased rooftop solar adoption, and expanded work-from-home policies. FDI disbursement reached USD 5.41 billion, up 9% and the highest Q1 level since 2022, while pledges and share purchases rose 43% to USD 15.2 billion. Imports increased 27% to USD 126.6 billion, with nearly 40% sourced from China, widening the trade deficit with China by 34% to USD 33.3 billion. Exports rose 19% to USD 122.9 billion, including USD 39 billion to the United States, resulting in a trade surplus with the U.S. of USD 33.9 billion, up 24%. Export activity accelerated ahead of U.S. tariff adjustments, following the replacement of a 20% tariff with a temporary 10% global tariff for 150 days. Executives identified energy supply, land reform, and U.S. trade policy as key determinants for investment flows in the second half of 2026.

VIET NAM
Pham Duc An appointed as governor of State Bank of Vietnam
(08 April 2026) Vietnam’s National Assembly appointed Pham Duc An, 56, as governor of the State Bank of Vietnam, replacing Nguyen Thi Hong, who will become vice chairwoman of the assembly for the 2026–2031 term. An, former chairman of Vietnam Bank for Agriculture and Rural Development and current chairman of Danang People’s Committee, assumes the role amid pressure to support a 10% growth target set by Party chief and President To Lam while containing inflation and maintaining financial stability. Vietnam’s credit-to-GDP ratio stands at 146%, with credit growth reaching 19% in 2025, limiting policy flexibility as credit expansion remains the primary growth lever. Inflation is rising, with consumer prices increasing 4.65% year on year in March, above the 4.5% target ceiling for 2026, driven partly by higher global energy prices linked to the Middle East conflict. The central bank has reduced its credit growth quota to 15% for 2026 and instructed banks to restrict lending to higher-risk sectors such as real estate. Liquidity conditions are tightening, with overnight interbank rates periodically reaching 7% as credit demand outpaces deposit growth, while banks raise interest rates to attract deposits. The leadership changes coincide with broader political consolidation, including the appointment of Ngo Van Tuan, 54, as finance minister and Le Minh Hung as prime minister. Market participants indicated limited adjustment time for the new governor, with expectations for immediate delivery on growth and stability objectives despite tightening financial conditions and external pressures including tariffs and energy price volatility.

ASEAN
ASEAN economies face increased risk of sovereign credit rating downgrades
(07 April 2026) Southeast Asian economies face increased risk of sovereign credit rating downgrades as fuel subsidies implemented to offset rising energy costs place pressure on fiscal balances and currencies. Indonesia maintained gasoline prices at IDR 10,000 per litre through subsidies, while the Philippines provided PHP 5,000 in cash support to transport drivers, and Viet Nam continued using a fuel price stabilisation fund, with Prime Minister Pham Minh Chinh planning expansion via a 2025 revenue increase. Thailand’s diesel subsidy programme pushed its oil fuel fund deficit to THB 42 billion, with potential borrowing of THB 20 billion raising concerns as public debt approaches 66% of GDP against a 70% legal ceiling. Indonesia’s Coordinating Minister estimated that oil at USD 97 per barrel would widen the fiscal deficit to 3.5% of GDP, exceeding the 3% legal cap, versus a prior 2.7% forecast. Credit outlooks for Indonesia were downgraded from stable to negative by Moody’s Ratings and Fitch Ratings amid concerns over fiscal discipline under President Prabowo Subianto’s spending plans, including free meals for 80 million people. The government is considering over IDR 100 trillion in budget cuts to contain the deficit. Currency depreciation has intensified, with the Philippine peso reaching a record low of PHP 60.748 per dollar and the Indonesian rupiah trading near IDR 17,000 per dollar, while Indonesia’s 10-year bond yields rose to around 6.9%, the highest since April 2025. Rising import costs due to weaker currencies are expected to feed inflation, potentially offsetting the intended stabilising effects of subsidies. Public unrest linked to fuel prices has emerged, including transport strikes in the Philippines and panic buying in Indonesia despite government assurances of stable pricing. The combination of elevated subsidies, weakening currencies and rising inflation creates a feedback loop that could further strain public finances and heighten downgrade risks.

THAILAND
Thailand plans broad economic and administrative reforms to boost growth
(06 April 2026) Thailand’s government plans broad economic and administrative reforms under a draft policy statement to be delivered by the prime minister, targeting faster growth and reduced business costs through technology adoption. The draft prioritises support for small and medium-sized enterprises, improved access to finance and investment in artificial intelligence, semiconductors and clean energy. It proposes fast-tracking an omnibus law within 2026 to remove outdated regulations and introducing a “super license” within 180 days to digitise state services and reduce bureaucracy. The government also intends to deploy big data and AI in agriculture to better align supply and demand, increase farmer income and boost food exports. Education reforms will focus on online access, job skills and AI-related training, alongside healthcare reform, social security updates and expanded support for an ageing population. Security measures include stricter drug controls, action against transnational crime and a review of free-visa entry rules. Tourism policy will shift towards flexible visas to encourage longer stays. Foreign tourist arrivals declined 2.3% year on year to 9.17 million between 01 January and 29 March. A leading business group forecasts 32 million arrivals in 2026, below the pre-pandemic level of nearly 40 million. The same group revised its 2026 GDP growth forecast down to 1.2%–1.6% from 1.6%–2.0%, compared with 2.4% growth recorded in 2025.

THAILAND
Thailand announces tighter control on crude palm oil exports and bottled palm oil prices
(06 April 2026) Thailand’s Commerce Ministry announced tighter controls on crude palm oil exports and bottled palm oil prices effective 07 April, in response to rising biodiesel demand linked to higher global fuel prices driven by the Middle East conflict. Under an order published in the Royal Gazette on 05 April, exporters must obtain prior government approval, providing details on destination, volume and pricing, with each permit valid for 30 days and requiring invoice submission within three days of shipment. The order, dated 03 April and signed by the Internal Trade Department’s director-general, will remain in force for one year. The ministry stated that the measures, alongside maintenance of energy reserves, will not affect farmers, who will continue to receive government protection. Thailand, the world’s third-largest palm oil producer, is forecast to produce 21.87 million tonnes of palm oil and 3.94 million tonnes of crude palm oil in 2026, according to the Office of Agricultural Economics. The policy aims to manage domestic supply and prices amid increased energy-linked demand pressures.

INDONESIA
Foreign exchange reserves decline for third consecutive month in March 2026
(08 April 2026) Indonesia’s foreign-exchange reserves declined for a third consecutive month in March, falling by USD 3.7 billion to USD 148.2 billion, the lowest level since July 2024, as Bank Indonesia intensified market intervention to stabilise the rupiah and the government met external debt obligations. Reserves have decreased by USD 8.3 billion in the first quarter of 2026. The rupiah weakened 1.3% in March amid higher oil import costs linked to the Middle East conflict and renewed concerns over fiscal pressures, prompting the central bank to prioritise exchange rate stability through continued intervention. A temporary US-Iran ceasefire contributed to a rebound in the currency, with the rupiah recording its strongest gain in seven months against the US dollar. Indonesia’s reserves remain sufficient to cover 5.8 months of imports and foreign debt servicing, which the central bank stated supports external sector resilience and financial stability. However, ongoing risks from elevated oil prices are expected to sustain pressure on the state budget and current account balance. Market expectations indicate Bank Indonesia is likely to maintain its policy interest rate unchanged for the remainder of 2026.

INDONESIA
Bank Indonesia indicates that scope for interest rate cuts is narrowing due to global developments
(08 April 2026) Bank Indonesia governor Perry Warjiyo stated that the scope for further interest rate cuts is narrowing due to global developments, signalling a recalibration of monetary policy to prioritise financial market stability. The central bank maintained its benchmark BI rate at 4.75% in March and indicated that the “room for reduction” is likely to shrink in the coming months. Policy adjustments will include increased issuance of rupiah-denominated securities (SRBI) to attract capital inflows while ensuring sufficient banking system liquidity to support lending. Bank Indonesia removed guidance on potential future rate cuts in its latest policy statement, reflecting the impact of the Middle East conflict, which has contributed to rupiah depreciation to record lows. The central bank had previously reduced rates by a cumulative 150 basis points between September 2024 and September 2025. Earlier expectations of continued monetary easing to support growth have been revised due to external pressures affecting currency stability.

RCEP Monitor

SOUTH KOREA
Household lending rises by KRW 0.5 trillion month-on-month at end-March 2026
(08 April 2026) South Korean household lending rose by KRW 0.5 trillion month on month to KRW 1,172.8 trillion at end-March, marking the first increase in four months, according to Bank of Korea data. The rebound was driven by growth in credit loans for stock investments, offsetting government measures aimed at limiting housing-related borrowing. Mortgage lending remained flat in March following a KRW 0.3 trillion increase in February. Other household loans, including credit lines and commercial real estate-backed lending, increased by KRW 0.5 trillion over the same period. Housing market activity showed volatility, with apartment transactions at 42,000 in December, 48,000 in January and 41,000 in February. The Bank of Korea maintained its benchmark interest rate at 2.50% after previous cumulative cuts of 25 basis points in February and May 2025 and in October and November 2024. Corporate lending increased by KRW 7.8 trillion to KRW 1,387 trillion, with loans to large companies rising by KRW 3.4 trillion and lending to small firms up KRW 4.5 trillion.

CHINA
Rebound in Chinese demand for LNG not expected to occur
(08 April 2026) Expectations for a rebound in China’s liquefied natural gas demand are weakening despite a Middle East ceasefire, as supply disruptions and higher prices persist. Chinese LNG imports fell 11% to 68.4 million tonnes last year, with BloombergNEF forecasting a further decline to 62.3 million tonnes in 2026, while Rystad Energy projects a modest increase to 70 million tonnes. Gas demand had already weakened, with apparent consumption down 0.9% in the first two months of 2026, extending declines seen in 2025. Forecasts assume LNG shipments from Qatar via the Strait of Hormuz will resume in April, but analysts indicate this will not offset structural supply damage from Iranian strikes. The destruction of two LNG trains in Qatar is expected to remove 12.5 million tonnes of annual capacity for three to five years, affecting a supplier that previously accounted for roughly one quarter of China’s LNG imports. China is expected to reduce reliance on Persian Gulf supply, increasing use of domestic production, pipeline gas from Russia and Central Asia, and substitutes such as coal and renewables. Alternative supply contracts outside the Gulf are estimated to cover demand for up to four months, after which China may increase imports from the United States despite tariffs. LNG prices rose sharply, with Asian spot benchmarks nearly doubling to about USD 20 per mmBtu in March, while China’s domestic-equivalent market increased 44% to around USD 15 per mmBtu. Industrial users have reduced operations, coastal power plants are limiting gas consumption, and importers are capping retail prices, further reducing LNG competitiveness. Higher price volatility is expected to constrain gas power utilisation relative to other energy sources.

NEW ZEALAND
Central bank keeps official cash rate on hold as fuel prices surge
(08 April 2026) New Zealand’s central bank held its official cash rate at 2.25%, the lowest level since mid-2022, with the Monetary Policy Committee signalling it will look through near-term inflation driven by higher fuel prices following the Middle East conflict. The decision, reached by consensus, maintains policy flexibility, with the committee indicating gradual rate increases may follow if inflation proves temporary, but warning that persistent second-round effects or rising medium-term expectations would require prompt tightening. The central bank expects inflation to rise to 4.2% in Q2 and remain above the 1–3% target range through 2026, with some economists projecting a peak above 4.5% by mid-year. Higher fuel costs are expected to feed into transport and food prices, while weak demand and spare capacity may limit broader price pass-through. Economic activity is slowing, with business feedback indicating weaker conditions in March and some forecasts pointing to a contraction in Q2 GDP. The New Zealand dollar was largely unchanged following the decision at around 58.03 US cents. The policy stance reflects uncertainty following a tentative US-Iran ceasefire, with oil prices having fallen below USD 100 per barrel after prior volatility.

ASEAN
Southeast Asia faces looming fertiliser shortages amidst Iran war
(31 March 2026) Southeast Asia faces rising risks of fertiliser shortages and price increases due to disruptions in the Strait of Hormuz, with over 20 vessels carrying nearly one million metric tonnes of fertiliser reportedly stranded, constraining regional supply. The crisis centres on urea, a key nitrogen fertiliser, whose price has risen 83% year to date and 50% since late February to USD 717.74 per tonne, with the Persian Gulf accounting for 30%–35% of global exports and natural gas representing 60%–90% of production costs. International Fertilizer Association indicated that while price impacts are evident, prolonged disruption could lead to physical shortages. China’s export restrictions have further tightened global supply. Exposure varies across Southeast Asia, with Thailand highly dependent on imports, sourcing 1.8 million tonnes or 55% of nitrogen raw materials from the Middle East in 2025, and holding sufficient stocks only until August 2026. Countries with domestic production capacity, including Indonesia, Malaysia and Viet Nam, are relatively more insulated, though supply constraints persist at the firm level, with Indonesian producer Saraswanti Anugerah Makmur reporting only 45 days of urea inventory. Concerns were raised over potential export prioritisation by state producer Pupuk Indonesia, with calls for export controls to secure domestic supply. Supply risks may escalate if Gulf production facilities halt operations due to storage constraints, prolonging disruption even if trade routes reopen. High fertiliser prices are expected to impact agricultural sectors unevenly, with stronger resilience in oil palm plantations due to elevated palm oil prices, while crops such as rubber, coffee, sugar and cocoa face greater pressure. Continued price volatility may also distort purchasing behaviour, delaying procurement and potentially reducing crop yields due to missed application cycles.

MALAYSIA
Bank Negara Malaysia indicates no immediate requirement for economic stimulus
(31 March 2026) Bank Negara Malaysia indicated no immediate requirement for a broad economic stimulus package despite the ongoing West Asia conflict. BNM’s governor stated that economic support should be holistic and targeted rather than broad-based, based on an assessment of overall economic conditions. He noted that Malaysia is entering the year from a position of strength following recovery from multiple crises, particularly the COVID-19 pandemic. Existing post-pandemic support measures, which are largely targeted, remain in place. The banking sector is prepared to assist borrowers, corporates, and SMEs facing financial difficulties. The government continues to obtain sectoral input through the National Economic Action Council (MTEN) to assess needs. This approach enables authorities to form a comprehensive view of economic conditions and direct assistance to priority areas. The governor emphasised that support cannot be applied broadly across sectors and must instead reflect a holistic and targeted framework.

INDONESIA
Indonesian business lobby calls for temporary higher deficit cap to address energy crisis
(31 March 2026) The Indonesian Chamber of Commerce and Industry called for temporary policy measures to address rising energy costs, including lifting the fiscal deficit cap, implementing work-from-home arrangements and sourcing oil from alternative suppliers such as Russia. The chamber’s chairman proposed raising the deficit ceiling above the statutory 3% of GDP to 4%–5% for three to six months to sustain at least 5% economic growth, as crude oil prices exceed USD 100 per barrel versus the USD 70 assumption in the 2026 budget. The Organisation for Economic Co-operation and Development revised Indonesia’s 2026 growth forecast to 4.8% from 5% and projected inflation at 3.4% compared with 1.6% previously. Moody’s Ratings and Fitch Ratings had earlier downgraded the sovereign outlook to negative, citing fiscal risks and policy uncertainty linked to government programmes. The chamber stated these assessments predated the Iran war and argued that temporary fiscal expansion would be understood under current conditions. The government has yet to confirm a deficit increase after retracting a 13 March proposal, maintaining a cautious approach focused on budget efficiency measures without detailing fuel pricing or broader interventions. Indonesia imports approximately one-third of its oil, with around 20% routed via the Strait of Hormuz, and holds less than 30 days of supply, increasing vulnerability to disruptions. The chamber indicated the need to diversify oil sourcing, including from Russia and the United States, to ensure supply stability. He characterised the government’s response as measured despite limited policy announcements relative to regional peers. Longer term, they expect the crisis to accelerate investment in more resilient energy systems, including renewables and electric vehicles, with discussions ongoing on potential incentives to support EV adoption.

INDONESIA
Indonesia to proceed with B50 biodiesel mix in 2026 amidst energy supply disruptions
(30 March 2026) Indonesia’s President Prabowo Subianto stated during an official visit to Japan that the country will proceed in 2026 with its B50 palm oil-based biodiesel programme. He confirmed at a business forum ahead of a meeting with Sanae Takaichi that Indonesia will increase the palm oil content in diesel from 40% to 50% this year. The B50 blend consists of 50% palm oil-based biodiesel and 50% conventional diesel. Authorities had previously scrapped the B50 rollout in January due to technical and funding constraints, maintaining the B40 blend instead. The policy shift indicates a reversal of that decision within the same year. The move follows discussions to revive the programme amid energy supply disruptions linked to the U.S.-Israeli war on Iran.

THAILAND
Bank of Thailand signals wait-and-see monetary policy amidst oil shock
(31 March 2026) The Bank of Thailand signalled a wait-and-see monetary policy stance, stating that interest-rate cuts are unlikely to address supply-driven energy shocks linked to Middle East tensions. The Bank of Thailand’s Assistant Governor said monetary policy is a demand-side tool and may not effectively manage oil-driven inflation, with targeted fiscal and regulatory measures viewed as more appropriate. The central bank indicated it is unlikely to ease policy further following a February rate cut, while leaving open the possibility of tightening if inflation proves persistent. Headline inflation is projected to return to the 1%–3% target range earlier than expected due to rising oil prices and supply disruptions, despite prices having remained negative for 11 consecutive months. Thailand remains highly exposed to energy shocks, with over half of oil imports sourced from the Middle East, including shipments through the Strait of Hormuz. Rising energy and logistics costs are creating downside risks to growth, affecting tourism and exports. Early indicators show weakening business sentiment in March, declining airport arrivals and reduced shipping volumes. The baht has depreciated 6% this month, marking its largest monthly decline in three years, with further weakness expected due to higher energy import costs and dividend repatriation. The government is preparing measures to mitigate rising fuel costs, including fuel excise tax cuts, increased welfare stipends and targeted fuel subsidies.

THE PHILIPPINES
The Philippines increases petroleum stockpile to 50.94 days as of 27 March
(30 March 2026) The Philippines increased its petroleum stockpile to 50.94 days as of 27 March, up from 45 days, according to the Philippines’ Energy Secretary. The inventory expansion includes gasoline, diesel and jet fuel, supported by procurement efforts from the Philippine National Oil Company. Recent deliveries include 142,000 barrels of diesel from Japan, with a further 900,000 barrels expected from Malaysia, Singapore, India and Oman. The government is actively seeking alternative suppliers outside the Middle East, including Colombia, Argentina, Canada and the United States. The Philippines, which relies heavily on Middle Eastern oil imports, is responding to supply disruptions linked to the ongoing war in Iran and has declared a national energy emergency. Petron Corp. has procured 2.48 million barrels of crude from Russia and may increase purchases if the conflict persists. These purchases were enabled by a US waiver permitting imports of Russian crude until 12 April. Additional supply signals include diesel and fuel cargoes exported by China to Southeast Asia over the weekend. The government stated that securing sufficient energy supply remains the primary objective.

VIET NAM
International shipping rates could increase by up to 80% due to Middle East conflict
(02 April 2026) Viet Nam’s international shipping rates could increase by 50% to 80% due to Middle East tensions disrupting supply chains, according to the Vietnam Maritime and Waterway Administration. Marine fuel prices have risen to USD 1,100–2,000 per tonne from USD 550–750 previously, with fuel accounting for 30%–40% of total shipping costs, prompting carriers to adjust freight rates. The increase in logistics costs is expected to raise import-export prices and weaken Viet Nam’s competitive position. Authorities have proposed stricter oversight of pricing and surcharges, alongside coordination with carriers to stabilise transport capacity and limit excessive price increases. Domestic container transport costs have risen by 7%–12% since mid-March. Rates on the Hai Phong to Ho Chi Minh City route have reached up to VND 2.8 million per 20-foot container and VND 5.3 million per 40-foot container, with higher pricing on return trips.

RCEP Monitor

CHINA
Chinese equities increasingly viewed as safe haven amidst Iran war
(31 March 2026) Chinese equities are increasingly viewed as a relative safe haven amid deteriorating global risk sentiment linked to the Middle East conflict and disruption to the Strait of Hormuz, which affects roughly one-fifth of global oil and gas flows and has driven a surge in crude prices. J.P. Morgan identified China as its most preferred regional market, citing low reliance on Gulf energy and strong fiscal support capacity. HSBC maintained an “overweight” stance, highlighting defensive characteristics supported by a predominantly domestic investor base and currency stability. China’s Shanghai Composite Index declined 6% in March, outperforming regional peers including South Korea’s market, which fell 18%, and Japan’s Nikkei, which dropped about 13%. BNP Paribas strategists expect China’s relative outperformance in Asia to strengthen if the conflict persists. Goldman Sachs stated that China is better positioned than several global peers to absorb the oil supply shock, supported by long-term energy diversification, expanding strategic oil reserves, and access to non-Middle East supply sources.

CHINA
Top Chinese airlines signal caution outlook for 2026 amidst rise in jet fuel prices
(31 March 2026) China’s three largest state-owned airlines, Air China, China Eastern Airlines and China Southern Airlines, signalled caution for 2026 as the Iran war drives a sharp rise in jet fuel prices and weakens industry outlook. All three carriers returned to losses in the fourth quarter of 2025, with China Eastern reporting a CNY 3.7 billion loss, Air China CNY 3.64 billion, and China Southern CNY 1.3 billion despite achieving a full-year profit. The airlines cited persistent geopolitical risks and weak global economic momentum, alongside domestic challenges including overcapacity, intensified competition, and pricing pressure from high-speed rail. Passenger volumes increased, but falling ticket prices constrained revenue growth. International operations remained a key revenue driver, with 2025 international passenger traffic rising 22.7% for China Eastern, 19.6% for China Southern, and 15% for Air China, although fourth-quarter capacity cuts to Japan and refund policies weighed on performance. Industry data showed a record 94 million passengers during the 40-day Spring Festival travel period in early 2026, up 4.7% year on year, but analysts warned rising fuel costs could offset demand gains. Jet fuel prices have more than doubled since February, threatening earlier global airline profit forecasts of USD 41 billion for 2026 and forcing network adjustments. Fuel accounted for 35% to 38% of operating costs in the first half of 2025, and China’s lagged fuel surcharge mechanism is unlikely to fully offset rising costs, compressing margins. Only China Eastern implemented fuel hedging in 2025, holding 500,000 barrels in hedged positions expiring in 2026, with a 5% fuel price movement estimated to impact profit by CNY 2.2 billion. Analysts expect deeper sector losses in 2026 before a recovery in 2027. Fleet expansion continues with deliveries of COMAC C919 jets, with China Southern raising its 2026 delivery target to 13 aircraft while China Eastern and Air China each maintain projections of 10.

SOUTH KOREA
South Korea to permit domestic oil refiners to swap crude supply from national reserve
(31 March 2026) South Korea will implement a policy permitting domestic oil refiners to swap crude supply from the national reserve, according to an industry ministry spokesperson on 31 March. The policy allows refiners to borrow crude oil from the reserve and return an equivalent volume once overseas shipments arrive. The measure was initially reported by Yonhap News Agency. The industry ministry stated that no disruption to national crude supply is expected before June. Local refiners have secured over 20 million barrels of crude oil for delivery by end-June. This figure was cited by YTN based on comments from a senior Industry Ministry official.

INDONESIA
Rupiah marks strongest gain in over six months, aligning with broader Asian trends
(25 March 2026) Indonesian markets rebounded after a week-long holiday, supported by easing geopolitical concerns following signals from Donald Trump regarding potential de-escalation in the Iran conflict. The rupiah appreciated by up to 0.6% against the US dollar, its strongest gain in over six months, while the Jakarta Composite Index rose as much as 1.5% and the 10-year government bond yield increased by six basis points. Market gains aligned with broader Asian trends and were supported by a decline in oil prices. However, uncertainty remains elevated, with volatility driven by shifting perceptions of escalation risks. During the holiday closure, a US-listed ETF tracking Indonesian equities declined 2% and an ASEAN stock index fell 1.8%, reflecting investor caution. Structural pressures persist, including credit outlook downgrades by global ratings agencies and a warning from MSCI over a potential market status downgrade. Prior to the holidays, Indonesian equities had fallen more than 20% from their January peak, entering bear market territory, while the rupiah had depreciated to record lows beyond Asian Financial Crisis levels. Despite vulnerabilities to geopolitical risks in the Persian Gulf, Indonesia may benefit from sustained demand for coal and palm oil exports amid high energy prices and shifts in East Asian sourcing strategies.

SINGAPORE
Monetary Authority of Singapore to tighten monetary policy at next meeting
(24 March 2026) Economists expect the Monetary Authority of Singapore to tighten monetary policy at its next meeting by 14 April, with signals that its 2026 core inflation forecast of 1%–2% may be revised upward due to rising import costs linked to the Middle East crisis. The central bank indicated it will update its inflation outlook, which analysts interpret as a precursor to policy tightening using its exchange rate-based framework. Bank of America highlighted emerging broader price pressures that may require stronger action to anchor inflation expectations. United Overseas Bank expects a 50-basis-point steepening of the policy slope in April and potentially another in October, with risks of earlier implementation in July, while more aggressive measures such as re-centering the policy band would depend on significant inflation surprises. Oversea-Chinese Banking Corp stated the April meeting is “live”, with options including slope steepening or combined adjustments, driven by rising import costs and resilient domestic labour market conditions. Maybank reported fuel prices have already risen sharply, with RON95 petrol up 20% and diesel about 40%, alongside expected electricity tariff increases in April. They also noted rising fertiliser, cooking gas and logistics costs are likely to raise food prices, which account for 20% of the inflation basket. Economists expect inflationary pressures to broaden as businesses pass higher input costs to consumers, with the transmission of the external shock still at an early stage.

CAMBODIA
LNG shortages reported in Cambodia, affecting public transport and households
(24 March) Liquefied petroleum gas shortages and price increases are emerging in Cambodia after Sokimex, operated by Sok Kong Import Export, announced it will cease LPG sales from 1 April due to an inability to import supply since early March. LPG prices have risen 60% since 4 March, while a 15-kilogram cooking gas cylinder increased from USD 17 to USD 30, triggering panic buying among tuk-tuk drivers, taxi operators, and households, with sellers reporting stock depletion. The disruption follows a broader fuel price surge linked to the Iran conflict, with gasoline prices up around 40% and diesel 70%, prompting the government to cut excise and value-added taxes. Sokimex accounts for approximately 3% of the LPG market, and Cambodia’s Energy Minister stated that seven other suppliers have placed orders with deliveries expected in March and April, while urging reduced LPG usage and substitution with electric stoves. Cambodia remains fully reliant on imported LPG, with 65% sourced from Viet Nam over land, 27% by sea, and the remainder from Thailand, increasing exposure to supply shocks. Sellers report operational disruptions and customer losses due to depleted inventories, while informal sector workers face declining income and rising financial stress, with approximately 85% of drivers holding debt. The supply shock adds pressure to an already weakened economy affected by slower growth, rising non-performing loans, geopolitical tensions with Thailand, and U.S. trade measures.

THE PHILIPPINES
Aircrafts being grounded due to jet fuel shortages a “distinct possibility”
(24 March 2026) Philippine President Ferdinand Marcos Jr. stated that grounding aircraft due to jet fuel shortages linked to the Iran conflict is a “distinct possibility”, citing reports that some countries are unable to refuel Philippine airlines, forcing carriers to carry fuel for return journeys. He indicated long-haul operations face the greatest risk, although grounding is not yet certain. The Philippines’ reliance on imported crude, much of it from the Middle East, increases exposure to supply disruptions and rising fuel costs. Cebu Air announced plans to reduce flights from next month due to higher fuel prices. Regional carriers are also adjusting operations, with Vietnam Airlines suspending some domestic routes, VietJet Aviation reducing flight frequencies, and Bamboo Airways signalling potential service reductions if oil prices remain elevated. Marcos’s comments contrast with the Philippines’ Energy Secretary statement that airlines have sufficient fuel orders and have not requested government assistance following a Department of Energy meeting. Airlines across Asia are preparing contingency measures amid risks of a significant oil price shock affecting aviation operations.

THE PHILIPPINES
Rising diesel prices significantly impacting Manila’s jeepney sector
(24 March 2026) Rising diesel prices linked to the Iran conflict are significantly impacting Manila’s jeepney sector, with pump prices increasing by about 16% on 24 March to a record of PHP 134.30 per litre. Driver Eric Helera reported working up to 18 hours daily while shortening routes to manage fuel costs, with earnings sometimes falling below PHP 500 per day after covering fuel and fixed “boundary” payments to vehicle owners. Diesel price increases described as the most severe experienced have reduced margins, with drivers requiring at least 10 passengers per trip to break even and full capacity achieved only a few times daily. Income declines have forced lifestyle adjustments, including reduced food spending and difficulty meeting household and education expenses. Some drivers have exited the sector, returning to provinces or seeking alternative employment due to unsustainable earnings. Jeepney driver unions have called for fare increases, but a recently approved fare hike was reversed by President Ferdinand Marcos, limiting revenue relief. Consumers are also under financial strain, constraining acceptance of higher fares despite acknowledging driver losses. A government cash transfer of PHP 5,000 is expected but viewed as insufficient to offset rising costs. The sector disruption reflects broader economic pressure from fuel inflation, with operational viability weakening across informal transport services.

THAILAND
Thailand’s exports increase 9.9% year-on-year in February 2026
(24 March 2026) Thailand’s customs-cleared exports increased 9.9% year-on-year in February, below the 15.8% forecast and slowing from January’s 24.4% growth, according to the Commerce Ministry. Growth was driven by electronics and electrical equipment. Imports rose 31.8% year-on-year, resulting in a trade deficit of USD 2.83 billion. Export growth for January–February 2026 reached 17% year-on-year. The Commerce Ministry stated exports are expected to continue growing in 2026, but may slow in March due to higher fuel and transportation costs and the impact of the Middle East war. The ministry will review its full-year export forecast in April, currently projected between a contraction of 3.1% and growth of 1.1%. Shipments to the US increased 40.5% in February, while exports to China rose 0.4%. The ministry maintained its rice export target at 7 million metric tonnes for 2026. The Foreign Trade Department indicated rice exports could fall short due to the war. In a worst-case scenario, a halt in Middle East shipments could reduce total rice exports by 1 million tonnes. Thailand exported 1.34 million tonnes of rice to the Middle East in 2025, with 75% going to Iraq. Rice exports declined 4.16% year-on-year to 1.15 million tonnes in the first two months of 2026. The baht depreciated 3.8% against the US dollar year-to-date, following a 9% appreciation in 2025. The weaker currency supported exporters but did not fully offset rising freight costs.

THAILAND
Tourism outlook weakens due to ongoing Middle East conflict
(25 March 2026) Thailand’s tourism outlook has weakened due to the ongoing Middle East conflict, with foreign arrivals stated to fall by up to three million if the war persists for six months. This would reduce 2026 arrivals from the government’s 35 million target to levels similar to 2023 (28 million) and result in an estimated economic loss of THB 150 billion (USD 4.6 billion), equivalent to about 10% of last year’s foreign tourism receipts. Even if the conflict ends by end-March, Thailand may still lose one to two million visitors. Rising global oil prices are increasing airfares and reducing travel demand, prompting cancellations and lower bookings. Thailand recorded 8.54 million visitors between 1 January and 22 March, down approximately 3% year-on-year. The government is shifting strategy to target high-spending Middle Eastern tourists, aiming for at least 200,000 arrivals, with marketing budgets reallocated from Europe and the US. Middle Eastern visitors spend an average of THB 80,000 per trip, compared with THB 61,000 for Europeans and THB 39,000 for Asian tourists. Flight disruptions have eased, with cancellations declining to fewer than 30 per day. Tourism, which accounts for around 12% of GDP, remains under pressure following earlier disruptions, with 32.97 million visitors recorded last year, down 7.23% year-on-year.

RCEP Monitor

AUSTRALIA
Australia and EU finalize free trade agreement that removes tariffs on key sectors
(24 March 2026) The European Union and Australia have finalised a free trade agreement that removes tariffs across key sectors to expand bilateral trade and diversify export markets. Tariffs on major EU agricultural exports, including wine, fruit, chocolate and processed foods, will fall to zero immediately, while tariffs on EU cheese will be eliminated over three years. The EU will also remove tariffs on most Australian agricultural products, including wine, dairy, grains and seafood, with expanded tariff rate quotas for beef, sheep meat, sugar, rice, wheat gluten, skimmed milk powder and butter. The agreement provides protection for EU geographical indications such as Pecorino Romano and Ouzo, while allowing continued use of certain terms like feta and gruyere by Australian producers under labelling conditions, and permitting domestic Prosecco production with export restrictions phased in over 10 years. Australia will fully liberalise access for EU passenger vehicles, with limited exceptions for trucks subject to phased tariff removal, and will raise the luxury car tax threshold for EU electric vehicles to AUD 120,000, exempting around 75% from the tax. The EU will eliminate tariffs on Australian critical minerals and hydrogen, while Australia will expand investment access in these sectors. The agreement enhances market access for services, including professional, maritime and financial services, by reducing discrimination and expanding opportunities for providers. EU investors will receive treatment equivalent to Australian investors and the most favourable conditions granted to foreign investors, with reciprocal rights for Australian firms to establish and operate businesses in the EU.

SOUTH KOREA
Shortage of Middle Eastern crude oil could force production cuts across plastics, textiles and consumer goods
(24 March 2026) Shortages of Middle Eastern crude oil are constraining naphtha supply in South Korea, disrupting petrochemical production and downstream industries. LG Chem Ltd., the country’s largest petrochemical producer, has suspended one of its three naphtha cracking facilities, with firms considering further shutdowns or reduced operating rates. South Korea sources about 50% of its naphtha from the Middle East, and supply disruptions have driven naphtha prices up by over 60% since the onset of the war, with prices rising from about USD 600 per tonne in January to over USD 1,400. Ethylene prices, a key derivative used in food-grade plastics, have nearly doubled, increasing pressure on packaging-dependent sectors. Instant noodle producers NongShim Co. and Samyang Foods Co. reported remaining packaging material inventories of two to three months and one to two months respectively. Shipping disruptions in the Strait of Hormuz have increased freight costs and exacerbated supply constraints. Industry participants report inventories as low as two weeks, with late March to early April identified as a critical period for supply stability. Panic buying has emerged, particularly for government-regulated garbage bags, with retailers reporting multiple-fold increases in sales and imposing purchase limits. The Environment Ministry has initiated a nationwide inventory inspection, while suppliers report shipping delays. The petrochemical sector, already under restructuring pressure, is seeking alternative feedstock sources from the US and Africa. A prolonged shortage could force production cuts across plastics, textiles and consumer goods, with companies warning of potential retail price increases. Industry representatives indicated that widespread disruption to plastic supply chains could materially affect sectors including food, healthcare, clothing and automotive, with broader economic impact.

AUSTRALIA
Fuel shortages reported at more than 600 service stations across Australia
(25 March 2026) Fuel shortages have been reported at more than 600 service stations across Australia, with around 10% of outlets in New South Wales and Victoria affected. The disruption follows reduced global oil flows linked to the near-closure of the Strait of Hormuz, which has constrained about one-fifth of global supply and driven price increases. Australia, which imports over two-thirds of its fuel, faces additional pressure as key supplier South Korea plans to cap some exports. It has been noted that demand has doubled since the conflict began, although shortages at retail sites are typically resolved within 24 to 48 hours. The government attributed the demand surge to panic buying and anticipatory purchasing rather than structural supply shortages. Fuel reserves stood at 38 days for gasoline and 30 days for diesel last week after stockpile drawdowns. In response, authorities will temporarily relax diesel standards for six months to expand sourcing options to the US, Canada and Europe. Fuel prices have increased, contributing to inflationary pressures alongside recent interest rate hikes by the central bank. The government has also introduced legislation to raise maximum penalties for anti-competitive conduct to AUD 100 million per offence, doubling the previous cap, following concerns that retail fuel prices rose faster than international benchmarks.

THAILAND
Thailand’s tourism recovery plan disrupted by escalating Middle East conflict
(16 March 2026) Thailand’s tourism recovery plan targeting 36 million foreign visitors in 2026 faces disruption due to escalating Middle Eastern tensions and the war involving Iran, which has increased flight costs and caused travel disruptions. Visitor arrivals had already declined 7% in 2025 to 32.9 million due to fewer Chinese tourists, and industry estimates now indicate a potential 10%–15% further decline in arrivals. Airlines have been forced to reroute flights around conflict zones, increasing fuel costs and ticket prices, while cancellations affecting routes through transit hubs such as Dubai have disrupted European travel to Thailand. Data from the Ministry of Tourism and Sports showed foreign arrivals fell 8.9% week-on-week to 616,229 in the first week of March, immediately after military strikes by the United States and Israel on Iran. Arrivals from Europe and the Middle East declined 18% during the same week, despite these markets accounting for 27% of all foreign visitors in 2025. Thai Airways International announced ticket price increases of 10%–15% due to rising fuel costs, with other airlines signalling similar adjustments. The Center for Economic and Business Forecasting estimates tourism revenue losses of up to THB 29 billion (USD 895 million) if the conflict persists for six months, or 9 THB billion–20 billion if it lasts one to three months. Tourism-related sectors contribute roughly 20% of Thailand’s GDP, and destinations such as Phuket, which rely heavily on European and Middle Eastern visitors, are expected to face the largest impact. Industry groups have urged the government to increase tourism promotion in Asian markets, particularly China, India and Malaysia, which sent 4.4 million, 2.4 million, and 4.5 million travellers respectively in 2025.

INDONESIA
Equities and government bonds decline amid concerns over budget deficit
(16 March 2026) Indonesian equities and government bonds declined amid concerns that the administration of Prabowo Subianto is moving towards removing the longstanding 3% budget deficit cap as rising oil prices linked to the war involving Iran increase fiscal pressure. The Jakarta Composite Index fell as much as 3.1% to an eight-month low, marking a potential fourth consecutive day of losses, while transport and property stocks led declines. Indonesia’s 10-year government bond yield rose 11 basis points to a 10-month high, and the rupiah weakened 0.2% to 16,985 per US dollar. Prabowo stated he would consider exceeding the deficit ceiling only temporarily in emergency situations. Analysts noted that maintaining the deficit cap may require either widening the fiscal gap or reducing growth spending. Higher oil prices could strain fiscal assumptions in the state budget, while reduced transaction values have been noted as investors delay positions ahead of the Eid holiday period. Yield risk is increasing for fixed-income investors, and foreign bond outflows may intensify if global risk sentiment deteriorates further. The weak equity performance has been attributed partly to thin liquidity, upcoming market closures during the holiday period, MSCI-related concerns, and fiscal deficit uncertainty. Analysts also warned that a weaker rupiah combined with higher energy costs could prompt a more hawkish policy stance from Bank Indonesia to contain imported inflation.

INDONESIA
Indonesia preparing budget cuts across ministries and agencies due to high oil prices
(16 March 2026) Indonesia is preparing budget cuts across ministries and agencies to prevent the fiscal deficit from exceeding the 3% of GDP legal ceiling amid rising oil prices. The government is modelling scenarios of a prolonged Middle East conflict lasting five to ten months and may consider relaxing the deficit cap only if the war persists for at least five months. Spending reviews will target operational costs such as official travel and equipment, while flagship programmes under President Prabowo Subianto, including free meals and village cooperatives, will be protected. Brent crude remains above USD 100 per barrel, significantly exceeding the USD 70 assumption in the 2026 budget, increasing subsidy pressures as Indonesia is a net oil importer reliant on fuel subsidies via Pertamina. Indonesia’s Finance Minister confirmed no plans to raise subsidised fuel prices, with higher costs to be absorbed by the state budget to avoid social unrest. The government also plans to increase revenues by capturing windfalls from coal, nickel and palm oil exports and intensifying enforcement against underinvoicing by exporters. Market conditions have deteriorated, with the Jakarta Composite Index falling up to 3.1% intraday and closing down 1.6%, while the rupiah weakened towards IDR 17,000 per dollar versus a IDR 16,500 budget assumption. Analysts highlight combined risks from elevated oil prices and currency depreciation, increasing fiscal strain through higher subsidy costs. The policy response is being assessed by markets as a test of Indonesia’s fiscal discipline under external shock conditions.

SINGAPORE
Business sentiment weakens following outbreak of war in Iran
(16 March 2026) Business sentiment among Singapore companies weakened following the outbreak of war involving Iran, which has increased energy prices and disrupted supply chains. The Singapore Commercial Credit Bureau reported its Business Optimism Index (BOI) for Q2 2026 declined to 4.1 percentage points, from 4.3 in Q1 2026 and 5.2 a year earlier, based on a survey of 200 business owners and senior executives conducted between mid-February and early March. Business optimism has softened for a second consecutive quarter as companies adopt a more cautious stance amid geopolitical uncertainty and increasing margin pressure from moderating selling prices and new orders. The conflict has also increased expectations of tighter monetary policy in April, with one forecast projecting core inflation at 1.3% in Q2 and 1.8% in the second half of 2026. Despite the overall decline, all six survey indicators—sales volume, net profit, selling prices, new orders, inventory and employment—remained in expansionary territory. Sector results were mixed, with wholesale trade sentiment improving sharply, including new orders rising to 26.7 percentage points, while the financial sector recorded 21.4 percentage points for both sales volume and net profit supported by stronger new orders and employment. Sentiment in transportation and services moderated, with services indicators for sales, profit and prices easing to 2.3 percentage points and new orders falling to zero. Manufacturing sentiment improved moderately, with sales, profit and employment indicators rising to 7.4 percentage points, while construction faced the weakest outlook, with selling price expectations falling into contraction at −7.7 percentage points alongside stagnant new orders and employment.

VIET NAM
Vietnamese authorities warn of potential jet fuel shortages from April
(16 March 2026) Vietnamese authorities have warned of potential jet fuel shortages from April following export halts by China and Thailand linked to the Iran conflict, with the Civil Aviation Authority of Vietnam stating risks could extend into subsequent months. Vietnam imports over two-thirds of its jet fuel, with 60% sourced from China and Thailand, while supplies from Singapore have also declined. Importers Petrolimex and Skypec indicated they can only guarantee supply through March and recommended restricting operations to essential domestic routes if disruptions persist. Authorities have instructed airlines to review flight plans and airport operators to prepare additional parking capacity for grounded aircraft. Export restrictions include China’s halt on new export agreements and a full ban on refined fuel exports from 11 March, alongside Thailand’s ban on refined fuel exports from 6 March. Viet Nam has initiated diplomatic engagement. Alternative sourcing options identified include South Korea, Japan, Brunei Darussalam, and India, though authorities assess it is difficult to secure new suppliers under current conditions. Domestic refineries are unable to significantly increase jet fuel output due to competing production demands. Importers also warned of approaching credit limits due to higher prices and requested more flexible bank financing. The disruption raises risks of reduced flight operations and broader cost pressures across Vietnam’s aviation sector.

MALAYSIA
Malaysia attracts increased investor interest amidst Iran conflict
(17 March 2026) Malaysia has attracted increased investor interest amid the Iran conflict, supported by political stability, a current account surplus and its position as a net energy exporter, which has strengthened resilience to rising global energy prices. The stock benchmark has outperformed regional peers in March, with foreign equity outflows limited to about USD 80 million and the FTSE Bursa Malaysia KLCI Index declining only 1.2%, while the ringgit has maintained gains against the US dollar. Higher crude prices are expected to support fiscal revenues, with petroleum income projected at 12.5% of government revenue in 2026. Prime Minister Anwar Ibrahim has implemented policies to expand semiconductor manufacturing, renewable energy and data centre capacity, contributing to record foreign direct investment, trade and tourism, all of which supports growth forecasts for 2026. Malaysia’s role in semiconductor assembly, testing and packaging, alongside plans to move into chip design, and its emergence as a regional data centre hub contributed an estimated MYR 14.1 billion to the economy in 2025. Investments in Johor and a planned special economic zone with Singapore are expected to sustain momentum. Compared with regional peers, Indonesia faces rating pressure, Thailand is constrained by high household debt and weak growth, and the Philippines is affected by a corruption scandal, reinforcing Malaysia’s relative attractiveness. However, risks include potential emerging market outflows if the conflict persists, increased subsidy costs from elevated oil prices affecting fiscal consolidation, and domestic governance concerns. Overall, Malaysia is positioned as both a defensive and growth market, benefiting from energy exports and structural investment trends.

MALAYSIA
Malaysia will not introduce new fiscal measures despite ongoing Middle East conflict
(16 March 2026) Malaysia will not introduce new fiscal measures despite heightened Middle East tensions affecting global energy markets. Malaysia’s Finance Minister II stated the government’s priority is maintaining stable energy and food supplies, with further policy responses dependent on whether the regional situation deteriorates further. Global oil markets have been disrupted after military attacks by the United States and Israel on Iran, followed by Tehran’s closure of the Strait of Hormuz, which carries about 20% of global oil supply, pushing Brent crude above USD 100 per barrel. Prime Minister Anwar Ibrahim stated Malaysia’s petroleum product supply is secure until at least May 2026 and confirmed the government will maintain the RON95 petrol subsidised price at MYR 1.99 per litre. The government will continue targeted subsidy programmes under Budi Madani, including Budi Individu, Budi Agri-Komoditi and Budi 95. Amir Hamzah said petrol supply remains stable and that energy companies have incorporated the Hari Raya Aidilfitri seasonal demand increase into supply planning. He added that national oil company Petroliam Nasional Bhd and other energy firms are increasing stock levels to support domestic demand and maintain supply security.

RCEP Monitor

NEW ZEALAND
Inflation projected to exceed Reserve Bank of New Zealand’s 1-3% target band
(16 March 2026) New Zealand inflation is projected to exceed the Reserve Bank of New Zealand 1–3% target band for much of 2026 as higher fuel costs linked to the war involving Iran increase price pressures, according to forecasts from major domestic lenders. Bank of New Zealand expects inflation to rise to 3.6% in the second quarter before easing to 2.9% by year-end. ASB Bank forecasts a 3.3% peak in the second quarter and 3% by the end of the year, while Westpac projects 3.2% inflation in the third quarter. These projections diverge from the central bank’s earlier estimate that inflation would decline to 2.3% by the end of 2026 from 3.1% at the end of 2025. Financial markets now price a 30% probability of an interest-rate increase in May and anticipate 75 basis points of cumulative tightening by year-end, which would lift the Official Cash Rate to 3%. Near-term inflation pressures are likely to be sustained and could prompt earlier monetary tightening if oil supply shocks influence price and wage-setting behaviour. New Zealand’s Finance Minister said Treasury officials outlined a worst-case scenario in which inflation could reach 3.7% if the conflict persists through much of 2026, fuel prices rise further, and imported inflation increases.

AUSTRALIA, EUROPEAN UNION
Australia and EU signal progress in negotiations over free trade agreement
(17 March 2026) Australia and the European Union have signalled progress towards a free trade agreement following a call between Australia’s Trade Minister and the EU’s Trade Commissioner, with both sides indicating negotiations are advancing. Australia’s Trade Minister stated confidence in reaching a deal aligned with national interests, while the EU’s Trade Commissioner confirmed talks are moving in the right direction and remain focused on a mutually beneficial outcome. The negotiations, which collapsed in 2023, have centred on disagreements over agricultural access, with Australia seeking increased quotas for lamb and beef exports and the EU pushing for improved access to critical minerals and reduced tariffs on manufactured goods. President of the European Commission Ursula von der Leyen reportedly told EU leaders that discussions are in the “final stretch”, with potential plans to travel to Australia to sign an agreement, though details remain unconfirmed. The renewed push reflects broader EU efforts to strengthen trade positioning amid global tensions and reduce reliance on the United States and China.

AUSTRALIA
Reserve Bank of Australia increases cash rate by 25 basis points to 4.10%
(17 March 2026) The Reserve Bank of Australia increased its cash rate by 25 basis points to 4.10%, citing sharply higher fuel prices driven by the US-Israel conflict with Iran. Global oil prices have risen more than 40% since strikes began on 28 February, with disruptions linked to restricted access to the Strait of Hormuz, through which around one-fifth of global oil and gas flows. The RBA indicated sustained higher fuel prices will add to inflationary pressures and may reduce economic growth domestically and across major trading partners. The rate increase positions Australia among the first major economies to tighten monetary policy in response to the conflict-driven energy shock. Economists have warned a prolonged conflict could trigger an inflation surge comparable to that following Russia’s 2022 invasion of Ukraine. The RBA also highlighted risks from prolonged uncertainty affecting global demand conditions. Australia’s reliance on imported fuel from Asia increases its exposure to elevated energy costs, reinforcing the inflationary impact.

ASEAN
Disruptions to global energy supplies due to Iran conflict raises risks to ASEAN’s energy security
(10 March 2026) Escalating military strikes by Israel and the United States on Iran since 28 February have disrupted shipping routes in the Persian Gulf, raising risks to Southeast Asia’s energy security due to its reliance on imported oil and gas. Missile and drone attacks have targeted oil infrastructure in Saudi Arabia and the United Arab Emirates, forcing shutdowns or output reductions at facilities. Shipping through the Strait of Hormuz is critical to Asia’s energy supply, carrying nearly one-third of the region’s liquefied natural gas imports and about 60% of crude oil flows. The International Energy Agency estimates that about 20 million barrels per day of crude oil and oil products passed through the route in 2025, with almost 90% of exports destined for Asia. Oil prices rose above USD 100 per barrel on 09 March and briefly approached USD 120 before falling below USD 90 after Donald Trump indicated the conflict could end soon. Southeast Asian countries face varying exposure, with the Philippines sourcing 96% of its oil from the Persian Gulf, while Viet Nam and Thailand import about 87% and 74% respectively from the region. Governments in the Philippines and Thailand have ordered reductions in air-conditioning use and official travel to conserve fuel, while Myanmar imposed alternate-day driving rules and queues have appeared at petrol stations across Myanmar and Lao PDR. Indonesia consumes around 1.6 million barrels of oil per day and has allocated IDR 381 trillion (USD 22.4 billion) for fuel subsidies in its 2026 budget based on an oil price assumption of USD 70 per barrel. Malaysia, a net oil and gas exporter, retains some buffer but prime minister Anwar Ibrahim warned a prolonged closure of the Strait of Hormuz could affect the sustainability of the MYR 1.99 per litre RON95 fuel subsidy. Natural gas markets have also tightened, with Asian LNG spot prices rising to about USD 25 per MMBtu in early March before easing to around USD 15–16. Singapore sources about 42.5% of LNG imports from Qatar, while Thailand obtains about 20.5%, exposing electricity generation to supply disruptions. Higher gas prices may lead utilities in Thailand, Viet Nam and Indonesia to increase coal-fired generation, while policymakers are considering diversification of supply, larger reserves and expanded renewable energy deployment to reduce exposure to geopolitical disruptions.

VIET NAM
Viet Nam implements new artificial intelligence law in first for Southeast Asia
(08 March 2026) Viet Mam implemented a new artificial intelligence law on 08 March introducing a risk-tiered regulatory model requiring AI providers, including foreign companies operating locally, to classify systems as low, medium or high risk under guidelines issued by the Vietnam Ministry of Science and Technology. The legislation requires companies to label AI-generated content such as deepfakes and disclose when users are interacting with AI systems rather than human agents. The law was passed by the National Assembly of Vietnam in December and adopts an accountability and transparency framework similar to the European Union AI Act. Viet Nam becomes one of a small group of jurisdictions, alongside the European Union and South Korea, to implement binding AI legislation rather than voluntary governance frameworks. The government stated in a December report that the law aims to align Viet Nam with international regulatory standards while preserving digital sovereignty. Analysts described the legislation as Southeast Asia’s first practical test of whether the region can move from voluntary principles to enforceable AI regulation, potentially influencing policy discussions within Association of Southeast Asian Nations. Legal analysis from LNT & Partners characterised the Vietnamese legislation as an initial framework whose effectiveness will depend on future implementing decrees, sector-specific regulations and enforcement practices. Analysts said the law could accelerate regional discussions about enforceable governance as deepfakes, scams and other AI-related harms expand across Southeast Asia. However, experts noted structural risks including reliance on provider self-classification of AI systems, which may incentivise companies to avoid high-risk designations that trigger compliance costs. Concerns were also raised that rapid introduction of detailed implementing rules could create compliance burdens for smaller firms. Analysts further warned that effective oversight will require mechanisms allowing challenges to automated decisions and participation from civil society, media and external stakeholders to ensure accountability mechanisms function in practice.

MALAYSIA
Airspace disruptions in Middle East could affect international tourism flows to Malaysia
(10 March 2026) The conflict involving the United States and Iran is creating disruptions in global aviation networks that could affect international tourism flows to Malaysia. Airspace disruptions at major Gulf aviation hubs including Dubai, Doha and Abu Dhabi have resulted in longer flight routes and higher ticket prices, affecting Southeast Asian travel markets reliant on these transit points for routes to Europe and Africa. According to analysts, reduced tourist confidence and rising aviation fuel costs linked to higher global oil prices could weaken long-haul travel demand and affect inbound tourism to Malaysia. The situation may test the momentum of the Visit Malaysia 2026 campaign, which targets 47 million international tourist arrivals and MYR 329 billion in tourism revenue. The challenge ranges from moderate to high but could remain manageable if Malaysia leverages regional demand from Singapore, Indonesia, China and Thailand while maintaining its reputation as a stable destination. Analysts emphasised that sustained disruption at Gulf transit hubs could affect air connectivity and the pace of tourist arrivals. Proposed mitigation measures include strengthening airline cooperation to increase seat capacity and expanding codeshare arrangements through alternative Asian transit hubs. Tourism operators such as hotels and travel agencies are also encouraged to provide flexible booking policies to support traveller confidence. It was noted that global conflicts can influence tourist perceptions of travel safety even when destinations are geographically distant from the crisis. He added that international travellers often make decisions based on perceived global stability rather than precise geography, although rapid information flows now allow tourists to access real-time updates. It was noted that the impact on Malaysia could remain limited if travel routes do not require transit through affected Gulf hubs, while airlines are adjusting flight planning to avoid conflict zones and maintain international connectivity.

MALAYSIA
Industrial production growth in Malaysia forecast to moderate in 2026
(10 March 2026) MBSB Research forecasts moderation in Malaysia’s industrial production growth to 3.0% in 2026 from 3.4% in 2025, citing high base effects from front-loaded production last year and risks from rising energy prices linked to escalating tensions in the Middle East. The firm warned that higher energy costs could increase production expenses and inflation, potentially weakening final demand and purchasing activity. Despite this outlook, domestic demand expansion is expected to support output growth and partially offset external risks. Malaysia’s Industrial Production Index recorded stronger-than-expected growth of 5.9% year-on-year in January, up from 4.8% in December 2025. Growth was broad-based across manufacturing (7.3%), electricity (6.3%) and mining (0.1%). Manufacturing expansion was led by electrical and electronics products (15.2%), food, beverages and tobacco (12.2%, and non-metallic mineral and fabricated metal products (7.0%). Mining output was supported by crude oil and condensate production growth of 3.8%, which offset a 2.1% decline in natural gas output. Sales of manufactured goods increased 7.1% year-on-year to MYR 169.4 billion, with the electrical and electronics subsector rising 15.6%. On a seasonally adjusted monthly basis, sales rebounded 2.9% following a 0.5% contraction in December. Export-oriented industries expanded 7.8% year-on-year, led by computer, electronic and optical products (17.2%) and vegetable and animal oils and fats (20.7%). Domestic-oriented industries also grew 6.4%, supported by food products and fabricated metal products. Globally, industrial production trends were mixed, with stronger growth recorded in Taiwan, Singapore and South Korea, while weaker performance was reported in Philippines and Thailand.

CAMBODIA
National Bank of Cambodia approves creation of companies to buy bad debts from financial institutions
(10 March 2026) The National Bank of Cambodia approved a framework to license asset-management institutions (AMIs) to purchase non-performing loans and related collateral from banks and microfinance institutions as bad debt levels rise across Cambodia’s financial sector. Licensed AMIs must hold at least USD 50 million in registered capital and acquire distressed assets through transparent arm’s-length transactions with agreed pricing. The initiative follows economic strain linked to US tariff pressures, two episodes of cross-border conflict with Thailand affecting tourism, trade and remittances, and the return of nearly 1 million Cambodian migrant workers from Thailand requiring employment to service bank and microfinance loans. Rising global energy costs following military actions by the United States and Israel against Iran have increased domestic fuel prices by about 14% within a week, adding pressure to household finances in a fully fuel-import-dependent economy. Asset quality in the financial system has deteriorated, with the International Monetary Fund warning in December about rising non-performing loans and shrinking banking profitability. The ASEAN+3 Macroeconomic Research Office reported the NPL ratio reaching 7.8% for banks and 10% for microfinance institutions in 2025, compared with 6.2% and 7.4% respectively in 2024. Data from the Credit Bureau of Cambodia showed the average personal loan size at about USD 6,500 as of December 2025. The Cambodia Microfinance Association reported the proportion of borrowers more than 30 days overdue on payments rising to 9.6% at end-2025 from 7.3% a year earlier. Mekong Strategic Capital stated that resolving distressed loans could become more difficult as court processing times may extend from about three years to between five and seven years as NPL volumes increase. They also questioned the feasibility of private-sector AMIs addressing roughly USD 5 billion in distressed loans without significant legal system reforms. The IMF’s December Article IV consultation indicated that the central bank does not plan to establish a state-backed AMI or provide liquidity support through purchases of AMI-issued bonds.

THAILAND
Thailand’s oil fund losing more than USD 32 million per day subsidising diesel prices
(11 March 2026) Thailand’s government is expanding measures to curb fuel demand as it subsidises domestic diesel prices through the state-run oil fuel fund amid rising global energy costs. Thailand’s Energy Minister said the fund is losing more than THB 1 billion (USD 32 million) per day, with accumulated losses projected to reach THB 10 billion by 18 March. The government will reassess the situation based on the fund’s position and global prices, but will continue fuel subsidies for now. The minister noted the fund previously managed debt of up to THB 120 billion during the early stages of the Russia‑Ukraine war. Thailand imports a large share of its energy, with about half of oil shipments originating from the Middle East, increasing exposure to supply disruptions if the conflict intensifies or persists. Authorities reported fuel hoarding by some farmers and rural consumers despite assurances that supplies remain sufficient. Thailand’s Commerce Minister said additional measures could be introduced if the situation worsens. The government has suspended most oil exports to prioritise domestic supply, increased biofuel blending ratios to reduce crude demand, and required state employees to work from home. The Bank of Thailand and the armed forces have also adopted remote work arrangements for some personnel.

MYANMAR
Residential property prices rise sharply despite economic contraction and ongoing conflict
(09 March 2026) Residential property prices in Yangon have risen sharply despite economic contraction and ongoing conflict in Myanmar, with condominium prices in some cases doubling since 2020 and tripling in certain outlying townships. A 130 sq m three-bedroom unit at Inno City, a mixed-use development completed in 2023 by South Korean developers, is priced at about MYK 1 billion (USD 476,000), compared with roughly USD 286,000 for a similar unit before the February 2021 military coup. Colliers Thailand said prices in major cities have roughly doubled since 2020 despite weak economic fundamentals. The World Bank estimates Myanmar’s real GDP will contract by 2% in the fiscal year ending March 2026, with inflation expected to remain above 20%. Analysts cited risk hedging rather than income growth or rental returns as the main driver of rising property values. A Yangon-based investor said he increased property investment from 2022, identifying a valuation gap where assets priced in kyat appeared undervalued in US dollar terms amid currency depreciation and inflation. He said the market has shifted from long-term rental investment to short-term property trading and speculative flipping. A property agent said internal migration from conflict-affected northern regions and the destruction of more than 55,000 homes following a March 2025 earthquake in central Myanmar increased demand for housing in Yangon. Some business owners have also redirected capital from manufacturing and hospitality sectors into real estate due to perceived lower risk. Capital controls introduced after the coup, including a 2022 requirement to convert foreign-currency income into kyat and tighter outflow restrictions in June 2024, have reduced overseas property investment and redirected funds into domestic real estate. A property consultant described the resulting demand as “artificial”, with buyers using property as a store of wealth amid concerns over the banking system. The Myanmar kyat depreciated from 1,330 per US dollar in 2021 to 4,520 in 2025, reinforcing property purchases as a hedge.

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AUSTRALIA
Consumer confidence edges higher in March 2026 despite Middle East conflict
(10 March 2026) Australia’s consumer confidence remained in pessimistic territory in March, with the Reserve Bank of Australia preparing for policy deliberations amid inflation risks linked to the widening Middle East conflict. A survey by Westpac Banking Corp. showed sentiment rose 1.2% to 91.6 points, remaining below the neutral level of 100. Rising oil prices linked to the war have increased concerns about renewed inflationary pressure in Australia. The central bank raised its policy rate earlier this year and is widely expected to hold rates at 3.85% at the upcoming meeting. Economic indicators show mixed conditions, with a tight labour market and elevated price pressures, but contrasted with weaker-than-expected household consumption growth in the December quarter and a rise in the household savings ratio to its highest level since the third quarter of 2022. Unit labour costs declined for a second consecutive quarter, indicating some easing of domestic inflation pressure. Economists expect the central bank to hold policy at the March meeting despite earlier comments from Governor Michele Bullock that another rate increase remains possible. Data from National Australia Bank Ltd. showed business confidence fell into negative territory in February for the first time in almost a year, while business conditions remained at +7 index points, near the long-run average. Capacity utilisation remained elevated and forward orders increased, while the capital expenditure index rose three points to a three-year high. Sally Auld, chief economist at the bank, said headline inflation could reach about 5% by June due to higher oil prices.

SOUTH KOREA
South Korea records strong export growth in first ten days of March 2026
(11 March 2026) South Korea recorded strong export growth in the first ten days of March, with shipments rising 55.6% year-on-year to USD 21.47 billion, according to data from the Korea Customs Service. The daily average export value increased 31.7% to USD 3.30 billion during the period. Semiconductor exports surged 175.9% amid strong demand for chips used in artificial intelligence applications. Exports of oil products, automobiles, steel products, auto parts, precision machinery and home appliances also increased by double-digit rates. Ship exports declined by double digits over the same period. Imports rose 21.7% year-on-year to USD 19.37 billion in the first 10 days of March. The country recorded a trade surplus of USD 2.10 billion during the period. Imports of chips, semiconductor equipment, machinery, oil products, precision machinery and coal posted double-digit increases. Imports of crude oil and natural gas declined by single digits during the 10-day period.

JAPAN
Japan to release oil from its national reserves starting as early as 16 March
(11 March 2026) Japan will release oil from its national reserves starting as early as 16 March, with Prime Minister Sanae Takaichi stating the government will act before a coordinated decision by the International Energy Agency to stabilise energy markets amid the war involving Iran. Takaichi said Japan would draw crude equivalent to 15 days of demand from private sector reserves and about one month of demand from the state stockpile. Japan’s total reserves equal around 254 days of oil demand, including 146 days held by the state and 108 days held by private companies and joint reserves with producing countries. The decision was taken in coordination with the G7 and the IEA but implemented ahead of a formal international release. About 95% of Japan’s crude oil imports originate from the Middle East, exposing the country to supply disruptions and price shocks linked to the regional conflict. Takaichi said Japan’s crude oil imports are expected to decline significantly from the end of the month. Since the conflict began, domestic refineries have reduced production and petrol prices have increased sharply. The government intends to maintain the national average petrol price at around JPY 170 (USD 1.07) per litre even if global prices continue rising. Economists have warned that sustained high oil prices could increase the risk of stagflation in Japan. The move represents the first major economic challenge for Takaichi following her general election victory the previous month. Japan previously tapped private sector reserves after the Russia’s full-scale invasion of Ukraine in 2022 to address market volatility.

ASEAN
Malaysia becomes Southeast Asia’s largest auto market in 2025
(28 February 2026) Malaysia became Southeast Asia’s largest auto market in 2025 with 820,752 vehicle sales, up 0.5% year-on-year, surpassing Indonesia’s 803,687 units, which fell 7.2%, marking the first change in regional leadership since 2014. Data compiled by Nikkei Asia across five markets show Malaysia’s sales have risen 61% from 508,883 units in 2020, compared with contractions of 23% in Indonesia and 27% in Thailand over the same period. The president of the Malaysian Automotive Association attributed performance to resilient domestic demand and favourable financing conditions. SUV sales in Malaysia rose 13% to 228,572 units, and combined hybrid and battery EV sales increased 52%, with EVs accounting for 8.45% of the market, supported by Proton’s e.MAS 5 launch. Indonesia exceeded its 780,000-unit target despite decline, with 2022 and 2023 sales previously above one million units, supported in 2025 by EV tax incentives. In Vietnam, VinFast sold 175,000 units, nearly doubling year-on-year, contributing to Vietnam overtaking the Philippines as the region’s fourth-largest market when combined with broader data, although VinFast posted a net loss of VND 24 trillion in the third quarter. In Singapore, BYD led overall sales with 11,184 units and a 21.2% share out of 52,678 registrations, with EVs representing 45% of new cars sold and supported by 28,000 charging points and incentives offering a 45% rebate on additional registration fees. Thailand showed recovery signs, with January 2026 sales rising 54% year-on-year to 73,936 units, and the Federation of Thai Industries forecasting 1.5 million units of production in 2026, up 3%.

THAILAND
Bank of Thailand to implement new retail gold trading rules from 01 March
(01 March 2026) The Bank of Thailand will implement new retail gold trading rules from 01 March, introducing a daily limit of THB 50 million per person per platform for online, baht-denominated gold transactions. The measures exempt US dollar-denominated trades, physical gold shop dealings, and futures markets. The central bank will require full upfront electronic payments for all transactions and has banned nominee accounts and short selling to enhance transparency and market standards. The action targets speculative, high-value gold trades that have been linked to dollar sales and increased demand for the baht. The baht has appreciated about 9% over the past year, ranking as the second-best performer among Asian currencies tracked by Bloomberg. Officials assess that currency gains have outpaced economic fundamentals and have tightened financial conditions for exporters, particularly those with thin margins and high price competition. The currency has traded near THB 31 per dollar for much of this year, a level some analysts consider a threshold for potential stronger intervention. In its latest statement, the Monetary Policy Committee said it will closely monitor currency movements and transactions exerting significant pressure on the baht and assess the adequacy of existing gold-related regulatory measures.

THAILAND
Thai authorities preparing measures in light of possible energy disruptions
(02 March 2026) The conflict between Israel and Iran that began on February 28, 2026 has led to oil price volatility and the closure of the Strait of Hormuz, disrupting supply equivalent to 20% of global demand. Thailand’s Energy Minister ordered urgent measures including preparations to suspend petroleum exports, the establishment of an energy emergency monitoring centre, and readiness to use the Oil Fuel Fund to subsidise domestic prices. The ministry instructed increased natural gas production in the Gulf of Thailand, postponement of maintenance at gas fields, and full-capacity operation of coal-fired and hydropower plants. Thailand currently imports crude via four routes covering the Middle East, Far East, the Americas and Africa, with Middle Eastern and some LNG cargoes transiting Hormuz. A spokesman for the Ministry of Energy stated that contingency plans are in place to source fuel from alternative suppliers, although reserves and prices have not yet been affected. Four LNG cargoes scheduled for March 2026 are being monitored, with two having cleared Hormuz and two in transit. As of February 23, 2026, Thailand held 4,925 million litres of oil stocks sufficient for 38 days, plus 2,870 million litres in transit, bringing total reserves to 7,795 million litres or 61 days of supply. The Energy Regulatory Commission prepared measures on 25 February to increase pipeline gas from the Gulf of Thailand, the Joint Development Area and Myanmar, secure additional term and spot LNG, and coordinate with the Electricity Generating Authority of Thailand and PTT Public Company Limited on power plant fuel reserves. A ministry source indicated diesel prices could exceed USD 100 per barrel after closing at USD 92 on 28 February, with domestic retail adjustments potentially visible from 04 March if global prices remain elevated.

MALAYSIA, UNITED STATES
Latest US tariffs to have minimal impact on Malaysia’s palm oil exports
(02 March 2026) Malaysia’s Plantation and Commodities Minister stated that the latest tariffs imposed by the United States have a minimal impact on Malaysia’s palm oil exports, as the US accounts for only 1.1% of total palm oil exports. She said the US is not a major destination compared with key markets such as India, Kenya and China. Responding to Senator Michael Mujah Lihan during a session in the Dewan Negara, she said the effect remains manageable and does not significantly affect overall export performance. She noted that US demand remains stable, particularly from the bakery and cosmetics industries, where palm oil is difficult to substitute with other vegetable oils. She added that the actual impact on rubber exports will depend on the final tariff rate and the scope of products affected. As a mitigation measure, the government is intensifying efforts to diversify export markets to other regions to reduce reliance on any single market.

INDONESIA, UNITED STATES
US-Indonesia trade pact assessed as delivering limited economic gains for Indonesia
(02 March 2026) The United States–Indonesia Agreement on Reciprocal Trade signed on February 19 in Washington is assessed by the Centre for Strategic and International Studies as delivering limited economic gains while requiring significant policy concessions from Indonesia. To secure a 19% US tariff rate, subject to ratification within 90 days, Indonesia would relinquish policies on local content requirements, an export ban on critical minerals, strict halal certification rules and its plan to impose a digital services tax. The CSIS said the agreement primarily advances US commercial and security interests rather than expanding market access. The deal provides zero-tariff treatment for 1,819 products, representing 24% of Indonesia’s exports to the United States, which itself accounts for only 10% of Indonesia’s total exports. CSIS estimates this equates to about 2% additional market access. Data show the US is a major buyer of only two of Indonesia’s top 15 export commodities, and only around 8% of commodities under exempted tariff lines are shipped to the US, compared with roughly 30% each to China and Europe. The think tank expects ratification to proceed despite potential political challenges for the administration of Prabowo Subianto. The CSIS suggested ratification could be followed by further negotiations on security alignment and subsidy provisions. Business uncertainty remains elevated after the US Supreme Court ruled that tariff measures imposed by Donald Trump under the International Emergency Economic Powers Act, including a threatened 32% levy on Indonesian goods, were unconstitutional.

THE PHILIPPINES
Philippines’ peso rises almost 2% year to date in strongest start since 2012
(27 February 2026) The Philippine peso has risen almost 2% year to date, marking its strongest start since 2012, supported by foreign inflows into the local stock market and a weaker US dollar. The currency has rebounded from a record low in January, and investors recorded two consecutive months of net equity inflows following eight years of outflows. Data as of 27 February 2026 show the peso among Asia’s top-performing currencies this year, amid broader regional gains driven by a stronger yuan and increased bearishness towards the dollar. The benchmark Philippine equity index is approaching bull market territory, attracting foreign funds. BMI, a unit of Fitch Solutions, forecasts the peso will weaken by more than 3% from Friday’s level to PHP 59.50 per dollar by year’s end. BMI stated that the peso’s recent strength reflects dollar weakness rather than improved domestic fundamentals. BMI expects the Bangko Sentral ng Pilipinas to cut policy rates by a further 25 basis points to 4% by end-2026, narrowing the interest rate differential with the US and reducing currency support. Economic growth slowed last quarter to its weakest pace in 14 years outside the pandemic, partly due to a large corruption scandal. The Governor of Bangko Sentral ng Pilipinas said this month that the central bank will support the economy provided inflation is not triggered.

VIET NAM
Vietnamese exporters report early disruptions as conflict in Middle East escalates
(04 March 2026) Vietnamese exporters are reporting early disruptions as conflict in the Middle East escalates, with delays to shipments but limited cancellations so far and customers adopting a wait-and-see approach. The director of New Golden Bridge Co in Ho Chi Minh City, said current orders are facing transportation delays, while near-term orders remain unchanged. The chairman of Sai Gon Trade and Production Development Corp said some buyers have requested deferred delivery schedules and warned that deeper US involvement could weaken demand in major markets and strain global supply chains. Sweden’s MSC Mediterranean Shipping Co has suspended all cargo bookings to the Middle East from 1 March until further notice due to security risks. Dubai-based DP World temporarily suspended operations at Jebel Ali Port in line with official directives. The chairman of the Ho Chi Minh City Import-Export Association warned of a repeat of the 2023–24 Red Sea crisis, citing likely sharp freight increases and sudden surcharges. Seafood exports to the Middle East reached about USD 366 million in 2024, according to Vietnam Association of Seafood Exporters and Producers, with member companies anticipating higher fuel and freight costs and possible demand declines. Agricultural exporter Hai Dinh Food Co has suspended lemon sample shipments to the region and shifted focus to Europe. In garments, Dony Garment Co said Jordan accounts for almost 20% of its export revenue, with potential delays of 15 to 20 days despite no cancellations. Cat Van Loi Co warned that freight surcharges and longer transit times could undermine the efficiency of its thermal power plant equipment project in Saudi Arabia. The Vietnam Petroleum Association said any closure of the Strait of Hormuz, which handles roughly 20% of global oil demand, could sharply raise crude prices and strain domestic fuel distributors under Vietnam’s fixed pricing cycle. The Ministry of Industry and Trade warned of rising global fuel and logistics costs and urged enterprises to diversify markets, insure shipments and adjust production and transport plans to mitigate disruption.

RCEP Monitor

AUSTRALIA
Australia’s economy expands at fastest annual pace in almost three years
(04 March 2026) Australia’s economy expanded at its fastest annual pace in almost three years in the December quarter, with real GDP rising 0.8% quarter on quarter, above an upwardly revised 0.5% previously, according to the Australian Bureau of Statistics. Annual growth accelerated to 2.6%, the strongest since early 2023, exceeding the Reserve Bank of Australia’s estimated 2% non-inflationary growth threshold. The RBA raised its cash rate by 25 basis points last month to 3.85% after inflation reaccelerated following three cuts last year. Inflation reached 3.8% in January and unemployment remained at 4.1%. Deloitte Access Economics said the data would heighten the likelihood of a further rate increase in May, with markets assigning around a 30% probability to a March hike and fully pricing tightening in May. The outlook has been complicated by Middle East conflict disrupting oil flows through the Strait of Hormuz and pushing prices up more than 10%, increasing cost pressures despite Australia’s status as a net energy exporter. Inventories contributed 0.4 percentage points to quarterly growth and government spending, largely on defence, added 0.2 points, while household consumption added 0.1 point. The household savings ratio increased to 6.9% from 6.1%, indicating cautious consumer behaviour. A key labour cost gauge slowed to its weakest annual pace since early 2021. Nominal GDP grew 6% in 2025 to AUD 2.85 trillion.

CHINA
Factory activity slumps more than expected in February 2026
(03 March 2026) China’s official manufacturing purchasing managers’ index fell to 49 in February from 49.3 in January, marking a second consecutive month of contraction and missing forecasts of 49.1, according to the National Bureau of Statistics. The reading matched contraction levels seen in October and April 2025. The composite PMI declined to 49.5 from 49.8, while the non-manufacturing PMI edged down 0.1 percentage point to 49.5. The NBS attributed the weakness to reduced factory operations and shipment delays during the extended Lunar New Year holiday from 15 to 23 February, the longest on record, and related timing distortions. In contrast, the S&P Global-compiled RatingDog China General Manufacturing PMI rose to 52.1 in February, the strongest since December 2020, supported by the fastest growth in new export orders since September 2020. Goldman Sachs noted that the private survey covers a smaller, more export-oriented sample and is conducted mid-month, whereas the official survey covers more than 3,000 companies and is compiled at month end. Preliminary official data indicated increased travel, entertainment and duty-free spending during the holiday period. China is scheduled to release February consumer and producer inflation data on Monday. Policymakers are expected to announce economic targets at the upcoming parliamentary meeting, with economists anticipating a reduction in the annual growth target to 4.5%–5% from around 5% in the past three years.

SOUTH KOREA
Equities mark record one-day decline over concerns over escalating Middle East conflict
(04 February 2026) South Korean equities fell 12% on Wednesday, marking a record one-day decline, with the Kospi down nearly 20% since Friday after gaining almost 50% in the first two months of the year. The sell-off was driven by concerns that an escalating Middle East conflict could disrupt energy supplies to the world’s eighth-largest oil importer and trigger broader macroeconomic strain. Heavyweights Samsung Electronics and SK Hynix, which together account for 40% of the index, have each dropped about 20% since the conflict began. Foreign investors sold a net KRW 5 trillion (USD 3.4bn) of Kospi shares this week, pushing the Kospi 200 volatility index to its highest level since March 2020. The Korean won weakened 2.5% over two days and briefly fell past KRW 1,500 per dollar, its lowest level since the global financial crisis. Brent crude rose 2.5% to USD 83.40 per barrel, intensifying concerns over inflation, growth and exchange rate stability. CLSA cited higher oil prices and the unwinding of leveraged retail positions as key drivers of the decline. The Bank of Korea said it would monitor markets closely and take action in the event of excessive currency moves. Lawmakers from the ruling party will meet the country’s top financial regulator to discuss stabilisation measures. Analysts also warned of further pressure on the won linked to Seoul’s USD 350 billion investment commitment in the US under a bilateral trade deal aimed at reducing American tariffs.

ASEAN, UNITED STATES
US Supreme Court ruling quashing Trump tariffs sparks varying reactions in ASEAN
(26 February 2026) The Supreme Court of the United States ruled on 20 February that President Donald Trump’s use of the International Emergency Economic Powers Act to impose reciprocal tariffs without congressional approval was unconstitutional. Trump subsequently invoked Section 122 of the US Trade Act of 1974 to impose a temporary global 10% tariff, effective 24 February, valid for 150 days and capped at 15%, and has indicated plans to raise it to 15%. It has also been suggested that Trump may use non-trade barriers measures more aggressively. Most Southeast Asian countries had previously faced tariffs of at least 19%, with Lao PDR at 48%, Cambodia at 49%, Thailand at 36%, and Viet Nam at 46% under earlier measures, later reduced in several cases through bilateral agreements. Viet Nam’s rate had been reduced to 20%, Thailand’s to 19%, and Cambodia secured exemptions for thousands of products. The temporary 10% rate narrows tariff differentials and is expected to prompt exporters, particularly in Viet Nam and Thailand, to accelerate shipments during the 150-day window. Singapore remains at 10% and recorded a US goods trade surplus of USD 3.6 billion with Singapore in 2025, up from USD 1.9 billion in 2024, potentially narrowing its relative advantage. Indonesia and Malaysia, which signed reciprocal agreements with Washington in October and last week, respectively, face domestic pressure to renegotiate; their agreements exempt selected exports such as Indonesian palm oil and Malaysian semiconductors but grant preferential access to US products and include clauses allowing higher tariffs if future trade pacts threaten US essential interests. The Indonesian think tank CELIOS is considering a legal challenge, while five Malaysian opposition MPs filed a motion with the Federal Court alleging lack of parliamentary approval, while four MPs from the ruling Parti Keadilan Rakyat called for suspension of ratification. The US has threatened more severe sanctions against countries seeking to withdraw from existing deals. A July UNCTAD report recorded an 11% decline in global foreign direct investment, with trade tensions cited as a risk to confidence, reinforcing calls for ASEAN diversification and increased intra-regional trade.

VIET NAM
Viet Nam’s deficit to increase as government advances large-scale infrastructure investments
(26 February 2026) Moody’s Ratings stated on 26 February that Viet Nam’s fiscal deficit and public debt are expected to increase as the government advances large-scale infrastructure investments. The country launched hundreds of major projects last year with an estimated total value of approximately USD 200 billion as part of a strategy to boost growth and diversify its export-reliant economy. Viet Nam is targeting a fiscal deficit of 4.2% of GDP this year, up from 3.8% in 2025. Public debt stood at around 33% of GDP last year and is projected to rise but remain below regional peers at roughly 40% of GDP by the end of the decade. Moody’s said a reform agenda initiated under top leader To Lam is expected to support banks and reduce their exposure to the real estate sector. Loan growth to real estate reached 42% year-on-year by the end of September, compared with an average of 27% between 2022 and 2024, with exposure forecast to stabilise this year. Vietnamese banks reported a Tier 1 capital ratio of 9%, about half the South-East Asian average, though the gap is expected to narrow due to higher capital requirements. Moody’s urged certain large state-owned banks to build capital buffers more aggressively, citing Bank for Investment and Development of Vietnam and VietinBank as having modest capitalisation relative to most private commercial banks.

INDONESIA
Indonesia completes largest global bond sale since at least 2017
(26 February 2026) Indonesia completed its largest global bond sale since at least 2017, raising EUR 2.7 billion through a three-part euro-denominated issuance and CNY 9.25 billion (USD 1.3 billion) via offshore yuan notes. The euro tranche attracted EUR 9.2 billion in orders excluding underwriters, reflecting a 3.4-times oversubscription ratio and enabling pricing at tighter risk premiums than initially indicated. Credit spreads on the offshore yuan notes also tightened, signalling competitive funding costs. The transaction follows Moody’s Ratings’ decision earlier this month to revise Indonesia’s Baa2 outlook to negative, citing risks including sustained budget deficits, prolonged currency depreciation, capital outflows or weakening state-owned enterprises. A downgrade would mark the first by Moody’s since 1998 during the Asian financial crisis, when Indonesia required support from the International Monetary Fund. Indonesia recorded a January fiscal deficit of IDR 54.6 trillion (USD 3.25 billion), equivalent to 0.21% of GDP, compared with typical post-pandemic January surpluses. Analysts at Citigroup Inc. expect the fiscal deficit to widen beyond the legal limit this year due to higher spending on a nationwide free meals programme and reconstruction in flood-affected provinces in Sumatra. The bond sale follows significant volatility in domestic assets, including the worst equity sell-off in nearly three decades after MSCI Inc. warned of a potential downgrade of Indonesia’s equity market classification to frontier status. The offshore yuan issuance marks Indonesia’s return to the dim sum bond market after its debut sale in October, amid strong global demand and low funding costs for such instruments.

THAILAND
Thailand mulls phased sodium tax on packaged food manufacturers
(26 February 2026) Thailand’s Excise Department is preparing a proposal for a phased sodium tax on packaged food manufacturers, which if approved would make Thailand the first country in Asia to impose nationwide levies on both sugar and salt. The deputy director-general of the Excise Department said the proposal will be submitted to the new government and would adopt a tiered structure similar to the 2017 sugar tax, with rates increasing according to total sodium content per serving. The tax would apply to total sodium content, including preservatives and baking soda, but exclude freshly cooked food, ready-to-eat meals and fast food. The first phase would impose a very low rate targeting only the highest sodium products for at least six years to allow reformulation. The measure aims to encourage manufacturers to reduce sodium content rather than raise fiscal revenue. Thailand’s 2024–2025 National Health Survey shows average daily sodium consumption of 3,650mg among those aged 15 and above, nearly double the World Health Organisation’s recommended limit of 2,000mg. High sodium intake has been linked to hypertension, kidney and cardiovascular diseases, with associated healthcare costs estimated at THB 1.6 trillion annually. The Excise Department has identified instant noodles, frozen meals and savoury snacks as key contributors to sodium intake, with high-sodium products accounting for almost 20% of the ready-to-eat and semi-finished food market value in 2022. A December study by Mahidol University estimates that a sodium tax on instant noodles and snacks could reduce daily intake by 53mg to 83mg. Industry resistance is reported, including concerns over disproportionate impact on lower-income households and doubts about behavioural change.

THAILAND
Rice exports to fall 11% year-on-year to 7 million tonnes in 2026
(25 February 2026) Thailand’s rice exports are projected to fall 11% year-on-year to 7 million tonnes in 2026, the Thai Rice Exporters Association said, marking the lowest level in five years. Annual export revenue from rice is approximately USD 4 billion, and Thailand slipped to third place globally last year. The decline is attributed to an appreciation of more than 8% in the baht over the past year to a near five-year high against the US dollar, reducing price competitiveness. Benchmark 5% broken white rice from Thailand is priced USD 20 to USD 30 per tonne above comparable grades from India and Vietnam. Thailand’s Hom Mali variety is priced at about USD 1,110 per tonne, compared with roughly USD 800 for Vietnam’s ST25. The president of the association stated that the baht is overvalued and warned that insufficient export volumes would increase downward pressure on domestic prices. The Bank of Thailand cut interest rates unexpectedly and said it is closely monitoring currency movements. Export performance is also affected by softer external demand, including Indonesia halting imports and the Philippines tightening restrictions. Rice is a major source of rural income in an economy where exports account for around 60% of GDP, raising risks to farm incomes and domestic price stability if the price differential persists.

THAILAND
Bank of Thailand unexpected reduces rate by 25 basis points to 1%
(25 February 2026) The Bank of Thailand reduced its policy interest rate by 25 basis points to 1%, effective immediately, in a decision that diverged from market expectations, with 21 of 27 economists surveyed by Reuters having forecast no change. Four members of the Monetary Policy Committee supported the cut to maintain supportive financial conditions, ease debt burdens for small and medium-sized enterprises and anchor medium-term inflation expectations amid downside risks, while two members voted to hold the rate at 1.25%. The committee stated it would prioritise safeguarding medium-term financial stability and preserving limited monetary policy space, while monitoring risks of financial imbalances from a low-rate environment. Thailand’s economy expanded 2.4% in 2025, according to the National Economic and Social Development Council, compared with 4.5% regional growth in Southeast Asia reported by the Asian Development Bank. Fourth-quarter 2025 growth was 2.5%, and Thailand’s Deputy Prime Minister and Finance Minister said the economy had likely bottomed out in that period with a rebound expected in 2026. The central bank projects growth to remain below potential and uneven across sectors in 2026 and 2027 due to structural constraints and intensified competition. Analysts forecast 2026 growth of 1.5% to 2.1%. The general election on 8 February resulted in the Bhumjaithai Party securing 193 of 500 lower house seats and leading efforts to form a new government, with business representatives citing political stability as critical to recovery. The committee stated that structural growth challenges cannot be resolved by monetary policy alone and called for coordinated policy measures to enhance productivity and competitiveness.

MALAYSIA
Malaysia now accounts for more than half of under-construction data center capacity across ASEAN markets
(26 February 2026) Asia is experiencing accelerated data centre development driven by demand for artificial intelligence and cloud computing, with constraints in Singapore between 2019 and 2022 prompting expansion into neighbouring markets. Malaysia now accounts for more than half of under-construction capacity across five regional markets, including Indonesia, Thailand, the Philippines and Viet Nam, according to DC Byte. Rapid growth has been concentrated in Johor state, supported by streamlined permitting and predictable utility allocation, although local authorities have introduced tighter water and power requirements for new facilities. In Indonesia, project timelines are slowed by coal-reliant and unreliable power supply, renewable energy approval delays, grid access uncertainty and extended permitting processes. Microsoft is investing USD 1.7 billion in Indonesian cloud and AI infrastructure and has agreed with the state electricity provider to add approximately 200 megawatts of renewable capacity over ten years. Google launched a new cloud region in Bangkok in January and estimates its data centre investments will generate more than USD 40 billion in economic value for Thailand over five years. Thailand faces potential constraints in delivering power to preferred data centre locations. The Philippines is preparing for increased data centre construction aligned with its expanding digital economy. Viet Nam is attracting attention due to strong demand and power availability, although permitting remains a constraint despite government efforts to streamline processes and develop dedicated technology parks. Industry expectations indicate potential entry of additional multinational providers into Viet Nam if early projects demonstrate regulatory effectiveness.

RCEP Monitor

CHINA, JAPAN
China adds 20 Japanese entities to its export control list amidst spat with Japan
(24 February 2026) China’s Ministry of Commerce of the People’s Republic of China added 20 Japanese entities to its export control list and placed a further 20 on a monitoring list, marking the first inclusion of Japanese firms since the list’s January 2025 launch. Blacklisted companies include shipbuilding and aerospace affiliates of Mitsubishi Heavy Industries, prohibiting Chinese exporters and overseas entities from supplying them with dual-use items or China-origin dual-use technology. The monitoring list includes Subaru, Hino Motors and TDK Corp., requiring exporters to submit end-user documentation, risk assessment reports and written pledges that goods will not support Japan’s military capabilities, and barring use of general licences. The measures expand earlier restrictions announced this year blocking exports to Japan with military applications, and introduce stricter scrutiny rather than outright bans for monitored firms. The actions follow Prime Minister Sanae Takaichi’s recent landslide election victory and her prior comments suggesting Japan could deploy its military if China used force against Taiwan, which she has declined to retract. Tokyo has protested the measures and demanded their withdrawal. China stated the curbs are intended to deter Japan’s remilitarisation and nuclear ambitions, while indicating law-abiding firms have no cause for concern. China’s dual-use export control regime covers more than 800 items including rare earths, chemicals, electronics, sensors and aerospace-related technologies. Japan sourced around 70% of its rare earth imports from China as of 2024, highlighting supply chain exposure. Some affected companies stated they are reviewing the measures or have limited or no China-linked imports. Analysts indicated the steps may function primarily as a political signal, with civil-use exports potentially continuing subject to documentation requirements.

AUSTRALIA
Monthly inflation in January rises 3.4% year-on-year, above 2-3% target band of central bank
(25 February 2026) Australia’s monthly inflation in January rose 3.4% year-on-year, above the 3.3% consensus and remaining above the 2–3% target band of the Reserve Bank of Australia for a seventh consecutive month. Headline CPI increased 3.8% annually, unchanged from December. Housing inflation accelerated to 6.8% from 5.5%, driven by electricity as well as new dwelling and rental costs, with electricity prices rising 32.2% over the year compared with 21.5% previously. Food and non-alcoholic beverages rose 3.1% due to higher wage and ingredient costs. Financial markets increased expectations of further tightening, pricing a move in May that would lift the cash rate to 4.1% and assigning a 70% probability of a third increase in November. Barrenjoey Markets Pty Ltd forecast two additional hikes this year, taking the rate to 4.35% by August. Goldman Sachs Group Inc. said a consecutive hike in March remains possible, although overnight-indexed swaps imply less than a 20% chance at the 16–17 March meeting. The Australian dollar strengthened and three-year government bond yields rose as much as 5 basis points to 4.29% following the data release. The currency has appreciated more than 6% against the US dollar this year, supported by policy divergence and commodity prices. The central bank stated it will continue to rely primarily on quarterly inflation data for forecasting while assessing the properties of the new monthly series. Unemployment remains low at 4.1%, and analysts cited a positive output gap and elevated unit labour cost growth as additional factors supporting a restrictive policy stance.

SOUTH KOREA
Bank of Korea keeps policy rate unchanged at 2.50% on 26 February
(26 February 2026) South Korea’s Bank of Korea kept its benchmark policy rate unchanged at 2.50% on 26 February, in line with expectations from 34 economists surveyed by Reuters. The seven-member monetary policy board also raised its 2026 GDP growth forecast to 2.0% from 1.8%, citing a chip-driven export boom led by Samsung Electronics and SK Hynix. Inflation remains steady, allowing the central bank to maintain a prolonged pause in its easing cycle initiated in October 2024 while monitoring financial stability risks and household debt. The decision reflects resilience amid trade uncertainties, including potential disruptions from U.S. tariff policy shifts affecting key sectors such as automobiles and steel. Analysts noted that a rate hike is only likely if inflation exceeds 2.5% and the dollar-won exchange rate surpasses 1,550. South Korea’s equity market showed strength, with the KOSPI surpassing 6,000 for the first time, extending gains after doubling in value over the past year. The central bank’s stance signals a cautious approach, balancing export-driven growth with external trade risks and domestic financial stability concerns.

THAILAND
Ruling Bhumjaithai Party declares victory in snap lower house election
(09 February 2026) Thailand’s ruling Bhumjaithai Party declared victory in the snap lower house election, with preliminary results indicating it is likely to retain power under Prime Minister Anutin Charnvirakul as counting neared completion. With nearly 95% of polling stations reporting, the election commission showed Bhumjaithai projected to win about 192 seats, compared with 117 for the reformist People’s Party and 74 for Pheu Thai. The People’s Party conceded defeat, with leader Natthaphong Ruengpanyawut confirming readiness to serve as opposition, while Pheu Thai leader Julapun Amornvivat said the party accepted the outcome. In the 100 proportional representation seats, the People’s Party led with about 27% of votes, ahead of Bhumjaithai’s 17% and Pheu Thai’s 16%. About 52.9 million eligible voters cast two ballots each at more than 99,000 polling stations, with voting closing at 17:00. Voters also participated in a referendum on reforming the 2017 constitution, with around 60% of votes counted so far indicating support for drafting a new constitution, 32% opposing change, and the remainder undecided. The constitutional vote was described as an initial step with no guarantee of reform. The election followed Anutin’s decision to dissolve parliament in December and required at least 251 lower house votes in parliament to select a prime minister. Anutin said coalition discussions would begin only after official results are confirmed.

THAILAND
World Bank downgrades Thailand’s economic growth in 2026 to 1.6%
(11 February 2026) The World Bank’s Thailand Economic Monitor projects Thailand’s economic growth to slow to 1.6% in 2026, down from the 1.7% forecast in July, reflecting weaker global trade, high household debt, and a slower tourism recovery. The economy is estimated to grow 2.2% in 2025. Goods export growth is projected to decelerate to 0.5% in 2026 following a surge in 2025, with particular exposure in sectors affected by US tariffs. Tourist arrivals are forecast to reach 35 million in 2026, equivalent to 88% of pre-pandemic levels, indicating a gradual recovery. Household debt remains among the highest in Southeast Asia, with tight lending conditions constraining private consumption. The central bank’s monetary stance is expected to remain accommodative this year. Headline inflation is projected to rise slightly to 0.7% in 2026 and return to the Bank of Thailand’s 1.0 to 3.0% target range by the third quarter. Private investment is expected to stay subdued, with potential improvement next year. Political uncertainty during the election cycle may delay approval and execution of the 2027 fiscal budget, potentially disrupting public investment plans. Economic growth is forecast to recover to 2.2% in 2027.

MALAYSIA
Ringgit strengthens against US Dollar following strong industrial data
(09 February 2026) The ringgit strengthened against the US dollar on 09 February following December Industrial Production Index data that exceeded market expectations, indicating continued domestic economic resilience. At 18:00, the ringgit rose 0.33% to 3.9325/3.9375 against the US dollar from 3.9440/3.9525 at last Friday’s close. Bank Muamalat Malaysia Bhd said most emerging-market currencies were firmer against the US dollar during the session. They attributed the improved sentiment to a risk-on environment in Asia following election outcomes in Thailand and Japan, which supported Asian currencies. They also said the ringgit is expected to remain well supported in the near term. Against major currencies, the ringgit appreciated versus the Japanese yen to 2.5104/2.5137 from 2.5111/2.5167 and strengthened against the British pound to 5.3482/5.3550 from 5.3548/5.3663. It weakened against the euro to 4.6647/4.6707 from 4.6508/4.6608.

MALAYSIA
GDP growth in Q4 2025 expected to exceed 5.0% recorded in Q4 2024
(09 February 2026) Economists expect Malaysia’s GDP growth in Q4 2025 to exceed the 5.0% recorded in Q4 2024, indicating stronger underlying momentum and reduced downside risks entering 2026. IPPFA Sdn Bhd said the official Q4 2025 outcome is likely to be broadly in line with the Department of Statistics Malaysia’s advance estimate of 5.7%, with limited revision risk. They said growth in Q4 2025 was more internally driven than a year earlier, supported by firmer household spending, tight labour market conditions, and moderating inflation that preserved real purchasing power. They added that any adjustment to the headline figure would likely reflect data completion and benchmarking rather than changes in underlying conditions. Full-year GDP growth for 2025 is estimated at 4.9%, slightly below the 5.1% recorded in 2024 but above the earlier official and Bank Negara Malaysia forecast range of 4.0% to 4.8%. Research firms cited strong Q3 2025 performance, resilient domestic conditions, and more benign tariff impacts as supporting firmer growth expectations. Economists said that official Q4 2025 growth is likely to fall within a narrow 5.5% to 5.8% range, with a modest chance of an upside surprise due to stronger year-end consumption and services activity. They added that growth in Q4 2025 was more broad-based than in Q4 2024, supported by private consumption, services, stabilising manufacturing, and sustained public and private investment. It has been argued that the stronger advance estimate signals economic resilience heading into 2026, thereby reducing the urgency for monetary easing. Barring a sharp global slowdown, any policy rate cuts are more likely in the second half of 2026.

SINGAPORE
Income inequality declines to record low in 2025 according to finance ministry study
(09 February 2026) Singapore’s income inequality declined to a record low in 2025, with the Gini coefficient after taxes and government transfers falling to 0.379 from 0.437 in 2015, according to a finance ministry study on income and social mobility released on 09 February. The ministry said the reduction coincided with real income growth over the past decade, with lower-income groups recording higher real income gains. The figures incorporate a revised methodology that now includes non-employment income such as rental and investment returns. The government also published a wealth inequality measure for the first time, estimating a wealth Gini coefficient of 0.55, compared with an income Gini of about 0.38 after redistribution. The study said Singapore’s wealth inequality level is broadly comparable with other advanced economies. Prime Minister Lawrence Wong said the government is renewing its social compact and aims to further narrow inequality despite a more challenging global environment. The report highlighted continued policy efforts including housing and healthcare subsidies, cash transfers to offset living costs, and increased investment in early childhood education. The government has also raised taxes on high-end property and vehicles while cautioning against policies that could deter high net worth individuals and capital inflows.

VIET NAM, LAO PDR
Lao PDR and Viet Nam agree to accelerate major infrastructure and economic cooperation projects
(09 February 2026) Lao PDR and Viet Nam agreed to accelerate major infrastructure and economic cooperation projects following talks between Lao Prime Minister Sonexay Siphandone and Vietnamese Prime Minister Pham Minh Chinh in Vientiane on 05 February. The leaders reviewed bilateral cooperation and confirmed continued progress across multiple sectors, with emphasis on economic connectivity projects. Both sides agreed to continue key developments, including the Laos–Vietnam railway and the Vientiane–Hanoi expressway, and to expand cooperation in energy, minerals, education, culture, digitalisation, and trade and investment. Construction of the expressway is underway, with Section 2 covering a 203.8 km stretch from Pakxan district to the Laos–Vietnam border in Xaychamphon district, Bolikhamxay province. The contractor reported steady progress and said the project is expected to improve cross-border transport and trade. 3S Development Co., Ltd. said the consortium received government approval to sign a concession agreement in October 2025, formally initiating construction. Machinery has been deployed along much of the route, with work in border areas scheduled to begin after the rainy season. The consortium aims to complete the expressway by 2029 by running bridge and road works in parallel and increasing machinery and labour inputs. The Vietnamese side reaffirmed its commitment to implementing signed agreements and delivering tangible outcomes under the bilateral cooperation framework.

MYANMAR, SINGAPORE, THAILAND, CHINA
Singapore, China, and Thailand rank as largest sources of foreign investment into Myanmar
(10 February 2026) As of end-December 2025, investors from 53 countries and regions had invested in Myanmar, with Singapore, China, and Thailand ranking as the largest sources of investment. Across 12 economic sectors, the power sector accounted for 28.29% of total approved investment, followed by oil and gas at 24.64% and manufacturing at 14.65%. At its first meeting of 2026 on 26 January in Naypyidaw, the Myanmar Investment Commission approved 20 new projects with a combined value of USD 62.911 million and more than MMK 212 billion in local currency. The projects are expected to create 3,382 jobs. The approvals comprise four new foreign investments in the industrial and service sectors and 16 new domestic investments across manufacturing, hotels and tourism, power generation, housing construction, livestock and fisheries, and oil and gas. Key approved activities include electric vehicle assembly and sales, hotel and tourism operations, housing development, oil and gas projects, power generation, livestock breeding, education services, food production, and garment manufacturing. The commission stated it continues to review and approve proposals from local and foreign investors in accordance with the Myanmar Investment Law.

RCEP Monitor

AUSTRALIA
Reserve Bank of Australia’s Deputy Governor states that Inflation remains too high
(11 February 2026) The Reserve Bank of Australia’s Deputy Governor stated that inflation remains too high and that policymakers are prepared to take necessary measures to return it to the 2 to 3% target band. The RBA increased the cash rate by 25 basis points to 3.85% last week, reversing one of three cuts made last year, and indicated further tightening is possible if inflation does not ease as forecast. Markets assign a 70% probability of a further increase to 4.10% at the May meeting, pending first-quarter inflation data. Core inflation rose to 3.4% in the fourth quarter, the fastest pace in over a year and above RBA forecasts, prompting a revision of the projected peak for core inflation this year to 3.7%. The Deputy Governor said credit growth suggested financial conditions may not be restrictive, with mortgage lending rising 9.5% by value in the fourth quarter following a similarly strong previous quarter, and investment loans reaching a record. Additional data showed the unemployment rate fell unexpectedly to 4.1% in December, a seven-month low, indicating potential labour market tightening. He noted that overall growth was constrained by capacity limits despite solid performance in several sectors, alongside robust consumer spending and record-high housing prices.

CHINA
Consumer price index rises 0.2% year-on-year in January 2026, below forecasts
(10 February 2026) China’s consumer price index rose 0.2% year-on-year in January, below the 0.4% increase forecast in a Reuters poll and slowing from 0.8% in December, according to National Bureau of Statistics data. On a month-on-month basis, CPI increased 0.2%, compared with expectations of 0.3%. Core CPI rose 0.8% year-on-year, easing from 1.2% in December. The producer price index declined 1.4% year-on-year, slightly better than the expected 1.5% fall and moderating from a 1.9% decline in December, while rising 0.4% month-on-month for a fourth consecutive increase, partly driven by higher global gold prices. Analysts noted that the data were distorted by the timing of the Lunar New Year, which falls in mid-February this year compared with January last year, and should be assessed on a combined January–February basis. Factory-gate deflation has persisted for more than three years, affecting manufacturer profitability amid weak consumer confidence and production disruptions linked to US trade policies. China’s economy grew 5% last year, meeting the official target, supported by exports to non-US markets. Ongoing deflationary pressure and a prolonged property downturn have weighed on fiscal metrics, with the fiscal revenue-to-GDP ratio falling 4.8 percentage points since 2021 to 17.2%, and the public debt-to-GDP ratio rising 40 percentage points since 2019 to 116% in 2025, according to Morgan Stanley. Policymakers are expected to announce annual economic targets next month, while the People’s Bank of China reiterated its commitment to an appropriately loose monetary policy to support the economy and guide prices towards a reasonable recovery.

JAPAN, UNITED STATES
Japan seeking “in-depth” talks on USD 550 billion investment framework
(11 February 2026) Japan is seeking in-depth discussions with the United States on investments under a USD 550 billion investment framework agreed as part of a bilateral tariff deal, according to Kyodo News. Japan’s Trade Minister departed for Washington to meet the US Commerce Secretary to finalise the first project under the framework. Japan’s Trade Minister stated that an announcement would be made as soon as possible if an agreement is reached. He noted that multiple discussions have already taken place and cautioned that negotiations would not be straightforward. The Trade Minister previously led Japan-US tariff negotiations as economic revitalisation minister under former Prime Minister Shigeru Ishiba. The visit marks his first trip to Washington as trade minister under Prime Minister Sanae Takaichi. Under the tariff arrangement, Japan committed to invest USS 550 billion in the United States in exchange for reduced US tariff rates. Both governments are expected to identify specific projects, with US President Donald Trump to make the final decision on the investments.