Economic and supply chain impacts from energy price shocks in Southeast Asia

Abstract

Following the war in Ukraine, it became evident that substantial energy price increases had complex impacts on the economic systems and supply chains throughout the Southeast Asian region. In this article, we employ a global applied general equilibrium model (GTAP-E-PowerS) to examine how ongoing energy price increases might affect sectors, economies and emissions levels of the region. We additionally investigate how technological development including energy efficiency gains, utilisation of capital and how output augmenting technologies may help mitigate costs. Our findings indicate demand for renewable energy by private and industrial sectors increase substantially as a substitute for traditional fossil fuels, but are not adequate to compensate for losses. Agriculture and food sectors are not significantly affected, suggesting less hazards to food security as they are not energy-intensive. Manufacturing, transport and electricity generation sectors, which are energy-intensive, are materially adversely affected. More interestingly, however, is the primary energy supply sectors, viz. oil and gas extraction, and petroleum product manufacturing sectors, whose output declines by 20–70 % across countries. Real GDP also declines substantially, by 1.0–3.8 % in the Philippines, Singapore, Vietnam, Indonesia, Malaysia and Thailand. Conversely, total emissions decline by 6–22 % across countries. Of the options considered, investment in improving utilisation of capital resources is found to be the most effective against energy price shocks.