Asia’s low inflation comes at a rising fiscal cost

Inflation across Asia is beginning to diverge sharply, driven largely by differences in how governments are managing rising energy costs. Some economies have allowed higher fuel prices to pass through to consumers, while others have relied on increasingly expensive subsidies and price controls to contain them. But as the financial cost of these regimes continues to soar, pressure is mounting for a change in approach. This raises the risk that inflation could accelerate much more markedly in economies where price pressures have so far remained relatively subdued.