How ASEAN+3 Can Build Resilience to Energy Shocks

Governments should focus on targeted support instead of broad subsidies, conserving resources for future shocks, promoting energy efficiency, and building resilience amid rising energy prices and fiscal constraints.

Rising Energy Costs Amid Global Uncertainty

Amid the ongoing Middle East conflict, a steep rise in international oil prices has imposed significant inflationary pressures globally, including in the ASEAN+3 region. The Brent crude prices surged by 60% from February to September 2026, prompting governments to shield households and businesses from escalating energy costs.

However, challenges from previous global financial shocks—stemming from the Covid-19 pandemic and the war in Ukraine—have constrained fiscal opportunities due to increased public debt. This scenario urges governments to protect the vulnerable sectors without depleting resources needed for future crises. ASEAN’s approach during the 2023-2025 inflationist period suggests a key lesson: prioritize shielding those severely affected while maintaining economic price signals.

Targeted Support Versus Broad Subsidies

While broad energy subsidies provided immediate relief, they also posed challenges by reducing energy conservation incentives and straining public finances. In contrast, approaches varied across economies, like Thailand, where energy subsidies in FY2024 equaled 0.6% of GDP. Economies such as Hong Kong, Indonesia, and Japan, along with Malaysia and Singapore, increasingly utilized targeted cash transfers. In China, Korea, and Thailand, temporary consumption vouchers were prioritized to support weaker demand. This spectrum of responses based on specific economic conditions demonstrates the feasibility of directing support more effectively towards the most impacted sectors, considering local economic conditions, fiscal constraints, and administrative capabilities.

Enhancing Long-Term Energy Resilience

Building long-term energy resilience requires more than immediate fiscal supportive measures. ASEAN+3 economies need diversified energy sources, improved efficiency, strategic energy reserves, and investment in renewable energy and connectivity to mitigate future disruptions. For example, China’s advancements in renewable energy and electric vehicles have fortified energy security. Regional cooperation initiatives like the ASEAN Power Grid aim to enhance energy security by supporting cross-border electricity trade. As fiscal constraints tighten, instead of pursuing broad subsidies that distort price signals, governments are encouraged to adopt targeted assistance. By doing so, they preserve fiscal health, enhance energy resilience, and better protect vulnerable populations against future energy shocks.

Source: Protect People, Not Prices: How ASEAN+3 Can Build Resilience to Energy Shocks – ASEAN+3 Macroeconomic Research Office