Market Highlight 08.05.2026

Asia is facing a new inflation threat on top of the oil shock, as the approaching El Nino phenomenon is expected to bring hotter temperatures and drier weather to countries from India to New Zealand, pushing food prices higher. According to the latest data, inflation has accelerated to multi-year highs across most Asian economies, driven mainly by rising transportation, logistics, and utility costs. The sharpest spikes have been seen in the Philippines and Pakistan, where inflation has exceeded 7% and reached as high as 11%, respectively. These pressures could intensify further as El Nino is forecast to bring hotter and drier conditions later this year. Food accounts for around 40 - 50% of household spending in emerging Asian economies, leaving these markets highly vulnerable to price shocks and declines in real income. The risk could become even more severe if Governments impose export restrictions to protect domestic food supplies, similar to what happened in 2022 and 2023. At the same time, lower hydropower output caused by El Nino could force countries to rely more heavily on coal and natural gas, driving electricity prices higher and adding pressure to both living costs and production costs.

Economists warn that upward pressure from food prices could become more apparent from the second half of this year, as the sharp rise in fertilizer prices following the conflict in the Middle East will take time to feed through into food prices. The IMF forecasts that inflation could rise by as much as 4% next year, while the Asian Development Bank has raised its regional consumer price inflation forecast for this year from 3,6% to 5,2%.

Domestically, interbank USD/VND continued to edge lower yesterday and closed the day at 26.310.

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