Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States, this includes Australia, New Zealand, China, Japan, and South Korea. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

ASEAN
Southeast Asian governments intensify measures to address impact of Middle East conflict
(24 May 2026) Southeast Asian governments are intensifying measures to address the economic impact of the Middle East conflict and energy crisis, which has increased inflationary pressures, weakened currencies, and strained public finances in oil-import-dependent economies. Indonesia raised its benchmark interest rate by 50 basis points to 5.25%, its first increase in two years, with the central bank citing the need to support the rupiah and contain future inflation despite recent declines in consumer price inflation. Thailand approved a THB 176 billion (USD 5.4 billion) “Thai Help Thai Plus” support package providing cash aid and benefits to millions of people, with Thailand’s finance minister warning that prolonged inflation could force smaller businesses to cut jobs or close operations. Governments, including Indonesia, Thailand, Viet Nam and the Philippines, have also introduced fuel demand reduction measures such as promoting remote work, limiting official travel, and cancelling flights. Capital Economics said governments may need to take further action if the Iran conflict continues and the Strait of Hormuz remains closed, increasing risks of inflation, balance-of-payments strains, and energy shortages. Protests linked to rising fuel costs have emerged in Indonesia among fishermen unable to afford diesel and in the Philippines among transport drivers. The Philippines, which sources 95% of its oil imports from the Middle East, raised interest rates in April and indicated further increases may follow due to rising food and energy costs. The Philippine peso has fallen 4.66% against the US dollar in 2026, while the Indonesian rupiah has declined 5.75%, making them among Asia’s weakest-performing currencies this year. Rising import costs and weaker currencies have increased fiscal pressure on governments attempting to shield consumers from higher energy prices. Benchmark 10-year bond yields have risen sharply across developing Southeast Asia, with Philippine yields increasing by 1.79 percentage points, the largest rise in the region.

ASEAN
Yield curves in several ASEAN bond markets steepen due to higher oil prices
(22 May 2026) Yield curves in several Southeast Asian bond markets have steepened as higher oil prices increase inflation risks and fiscal pressures linked to fuel subsidies and government support measures. The spread between two- and 10-year government bond yields in Thailand widened to about 110 basis points this month, the largest gap since November 2022, while the equivalent spread in the Philippines reached as much as 120 basis points, the widest since January 2023. Malaysia’s five-to-10-year yield spread has also increased since the start of the Middle East conflict. Fidelity International said ASEAN economies remain vulnerable to further curve steepening due to weaker fiscal buffers and dependence on energy imports if oil prices remain elevated. Citigroup strategists said yield curves in Thailand and the Philippines could steepen further because of weak demand for long-dated sovereign debt. A Thai government bond auction for debt maturing in 2050 on 13 May recorded a bid-to-cover ratio of 1.17 times, the lowest for that tenor this year. The Philippine government subsequently rejected all bids for a seven-year bond auction to avoid a sharp rise in yields. Thailand is proceeding with a THB 400 billion (USD 12 billion) emergency borrowing programme to finance cash handouts, fuel relief and subsidies, while public debt approaches the government’s self-imposed ceiling of 70% of GDP. In the Philippines, Fitch Ratings and S&P Global Ratings both downgraded the country’s credit rating outlook due to risks associated with higher energy prices. Malaysia, despite being a net energy exporter, is also increasing spending on fuel subsidies, although the government stated last month that it remains on track to meet its fiscal deficit target for the year. Indonesia differs from regional peers, with its yield curve flattening as Bank Indonesia sold short-term debt and purchased long-dated bonds to support the rupiah and stabilise financing costs. Bank Indonesia’s larger-than-expected interest-rate increase on 20 May also contributed to upward pressure on short-dated yields.

MALAYSIA
Exports to major trading partners reach record levels between January to April 2026
(26 May 2026) Malaysia’s exports to major trading partners reached record levels between January and April, with Malaysia’s Deputy Investment, Trade and Industry Minister attributing it to investments secured under the Madani government over the past three years. The minister said approved investments totalled MYR 329.5 billion in 2023, MYR 384.4 billion in 2024, and MYR 426.7 billion in 2025, bringing cumulative approved investments under Prime Minister Datuk Seri Anwar Ibrahim’s administration to MYR 1.14 trillion. He stated that investment projects typically require several years to materialise through land acquisition, factory construction, machinery installation and workforce hiring before contributing to industrial output and exports. Malaysia’s total trade reached MYR 1.127 trillion in the first four months of the year, surpassing the MYR 1 trillion threshold one month earlier than in the previous year. Exports totalled MYR 609.31 billion, while imports reached MYR 517.40 billion. The trade surplus doubled year-on-year to MYR 91.92 billion. The minister said total trade, exports, imports and trade surplus all recorded their highest levels on record for the January-to-April period. He said the performance demonstrated that increased investments were translating into stronger manufacturing activity, export growth and wealth generation. He added that the economic momentum was benefiting all Malaysian states, including those governed by opposition parties.

MALAYSIA
Economy grows 5.4% year-on-year in first quarter of 2026
(25 May 2026) Malaysia’s economy grew 5.4% year-on-year in the first quarter of 2026, slightly above the advance estimate of 5.3%, supported by household spending, investment activity and continued strength in electrical and electronic exports, although growth moderated from 6.2% in the previous quarter. The governor of Bank Negara Malaysia said the economy entered the Iran conflict and energy crisis from a position of strength supported by resilient fundamentals. However, Bank Negara data showed monthly real GDP growth slowing from 7.1% in December to 6.8% in January, 5.2% in February and 4.1% in March, indicating weakening momentum despite Chinese New Year and Hari Raya spending effects. Private consumption growth slowed to 4.7% from 5.6% in the preceding quarter, while private investment eased to 7.8% from 9.2%. On a seasonally adjusted quarter-on-quarter basis, the economy contracted marginally by 0.01%. UOB Malaysia said downside risks were increasing as the conflict entered its 12th week and the Strait of Hormuz remained effectively closed. The Socio-Economic Research Centre warned that the impact of the war on growth could be underestimated and said the full-year growth outcome may move towards the lower end of Bank Negara’s 4% to 5% forecast range. RAM Rating Services said the growth drag could intensify in the second half of 2026 if supply disruptions persist. Malaysia’s headline inflation increased to 1.6% in the first quarter from 1.3% previously, with Bank Negara expecting inflation to trend towards the upper end of its 1.5% to 2.5% forecast range. Economists warned that higher production and logistics costs may increasingly be passed on to consumers, particularly through food and services prices.

THE PHILIPPINES
Authorities state that merchandise exports could reach new record high in 2026
(26 May 2026) The Philippines’ Department of Trade and Industry said merchandise exports could reach a new record high in 2026, supported by sustained global demand for Philippine products. The Philippines’ Trade Secretary said exports of goods reached a record USD 84.48 billion in 2025, up 15.3% from USD 73.27 billion in 2024 and the highest level since records began in 1991. Merchandise exports totalled USD 22.7 billion in the first quarter of 2026, increasing 12.7% from USD 20.14 billion in the corresponding period last year. The Trade Secretary said semiconductors, electronics, minerals and automotive parts continued to drive export growth, while agricultural exports, including coconuts, bananas, pineapples and ube, were also recording strong demand. The secretary said the government remained optimistic about achieving another export record despite higher domestic fuel and operating costs linked to the Middle East conflict, noting that such challenges were affecting multiple countries. They added that ongoing free trade agreement negotiations were expected to further support export growth. The Philippine Exporters Confederation also said merchandise exports could achieve another record this year, provided electronics and major agricultural exports remain exempt from US tariffs. He said exporters continued to face challenges, including regulatory burdens, financing access and compliance requirements. They added that although Philippine exports were growing, neighbouring countries were recording faster increases in overseas shipments.

INDONESIA
Palm oil farmers facing significant income losses following export centralization plan
(25 May 2026) Indonesian palm oil farmers are facing significant income losses following the government’s plan to require palm oil exports to pass through the newly established state-owned trading entity Danantara Sumberdaya Indonesia (DSI). Data from the Indonesian Oil Palm Farmers Union and the Indonesian Palm Oil Farmers Organizations Association showed fresh fruit bunch prices in West Sulawesi, West Kalimantan and North Sumatra fell to around IDR 1,000 to IDR 1,500 per kilogram from about IDR 2,800 per kilogram previously. The Indonesian Oil Palm Farmers Union said exporters and processors reduced or temporarily halted purchases after the proposed single-gate export system triggered negative market reactions. They warned that the policy could create a monopsony market structure that would further depress farmgate prices and threaten the sustainability of smallholder plantations. They said many farmers were considering reducing or stopping fertiliser use because lower prices may no longer cover production costs. Smallholders account for around 40% of Indonesia’s palm oil supply, raising concerns over future supply disruptions if productivity declines. They also warned that the policy could undermine the government’s B50 biodiesel programme by reducing domestic palm oil feedstock availability. The chairman of the Indonesian Palm Oil Farmers Organizations Association said uncertainty surrounding the policy caused traders, refiners and exporters to delay transactions, increasing market panic and weakening crude palm oil prices. Market data showed crude palm oil tender prices declined from around IDR 15,300 to IDR 12,150 per kilogram within several days. The chairman said businesses lacked clarity on trading arrangements, payments, price formation and risk-sharing mechanisms under the new export system. The government has defended the policy as a measure to prevent export invoice manipulation and protect export tax revenues.

THAILAND
Trade deficit hits record USD 10 billion in April 2026 due to sharp increase in import costs
(25 May 2026) Thailand recorded its largest trade deficit since records began in 1991 after higher imports of capital goods, raw materials and rising oil and gas prices drove a sharp increase in import costs. Commerce ministry data showed imports surged 45% year-on-year in April, exceeding the highest estimate in a Bloomberg survey of economists. Exports increased 23.1%, slightly above the median forecast. Imports exceeded exports for a seventh consecutive month, widening the trade deficit to USD 10 billion in April compared with a median estimate of USD 5.3 billion. The director-general of the Trade Policy and Strategy Office said strong imports and widening trade deficits were likely to persist if energy prices remained elevated and artificial intelligence-related demand continued driving trade flows. He added that continued trade imbalances could place further pressure on the baht. The office forecast Thailand’s export growth for the year within a range of minus 3% to plus 8%, with a base-case estimate of 3%. The director-general said the broad forecast range reflected uncertainty surrounding global energy prices and the outlook for AI-related demand.