An oil tanker in the waters off Singapore. In emerging Asia, Singapore is expected to be the hardest hit by higher oil prices, according to a Barclays report.

IN emerging Asia, higher oil prices -- fuelled by escalating tensions between the United States and Iran -- are likely to benefit Malaysia's growth the most, while hitting Singapore the hardest, said Barclays analysts in a Jan 8 report.

"The comfort from easing trade and global risks seems to be over for policymakers in Emerging Asia, who are now likely to be on high alert, monitoring the potential impact of the current rise in oil prices," said the report.

Their report analysed the potential effect of higher oil prices on gross domestic product (GDP) growth, inflation, and current accounts, and monetary policy of nine Asian markets, including five Asean markets: Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

Growth

As a net exporter of oil and gas, Malaysia is unsurprisingly tipped to be a potential beneficiary. A rise of US$10 per barrel would translate to a rise of 0.1 percentage point in economic growth, according to Barclays estimates.

The same oil price increase is estimated to mean growth decreases of 0.1 percentage point for Indonesia, 0.2 percentage point in Indonesia and Thailand, and 0.3 percentage point in Singapore.

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Inflation

The Philippines is estimated as being the most sensitive to changes in oil prices, reflecting the relatively large weight of energy in its consumer price index (CPI) basket. A US$10 per barrel rise could mean a 0.4 percentage point rise in the CPI.

"By contrast, fuel subsidies will likely limit the CPI pass-through in Indonesia and Malaysia," said the report, estimating a 0.1 percentage point rise in CPI for both markets.

The CPI impact on Singapore and Thailand is estimated at 0.2 percentage point and 0.3 percentage point respectively.

Current account

Among the Asean countries, current account surpluses in Thailand and Singapore would likely shrink the most relative to GDP.

"Given their large current account surpluses, this is unlikely to be of great concern," said the report. "Policymakers may even welcome this in Thailand, as it could potentially alleviate pressure from currency appreciation."

As an energy exporter, Malaysia is estimated to see its surplus rise by US$0.7 billion, or 0.2 per cent of GDP.

Monetary policy

"For now, we do not see high oil prices materially changing central banks’ reaction functions, given that strengthening growth momentum remains the key priority for most," said the report.

"However, the longer oil prices remain higher, the more worried central banks will likely become about price stability," it added.