Energy shock in Asia: policy choices ahead

High energy prices and growing concerns over energy security have already prompted significant policy responses across Asia. Some governments are looking to introduce inflation-suppressing measures such as subsidies or price caps, but these provide limited incentives for energy conservation and can be fiscally expensive. Countries with weaker fiscal positions may have no choice but to allow prices to rise sharply. This will weigh push up inflation and weigh on growth, but is more sustainable.