Malaysia among economies to win big from high commodity prices - Moody's Analytics

It highlighted that Malaysia, Colombia, Indonesia, and Saudi Arabia were among the few economies that would benefit from the high commodity prices.

"For Colombia and Saudi Arabia this is crude oil. For Indonesia and Malaysia this is palm oil, the price of which has surged following severe global shortages of Russia- and Ukraine-produced sunflower oil," senior economist Jesse Rogers said in an analysis titled "Emerging Market View: The Growth Recession".

He said across the rest of the emerging world, inflation is pushing higher, and central banks are not going to give up until it is tamed.

"Monetary policy in most of Latin America is now in the restrictive territory. And even in Southeast Asia, where inflation is a relative oddity, higher prices are sprouting.

"Central banks have snapped into action, with bank governors in the Philippines and Malaysia raising rates. Indonesia and Thailand will be next."

Rogers said central bank surveys show inflation expectations are still on the rise which could pose a problem if consumers begin to factor price increases into demands for higher wages -- something that is not as yet widespread, in large part as labour markets remain weak.

The situation is likely worse in emerging Asia, the senior economist opined.

While there is a general lack of timely labour market statistics, he said emerging Asian economies were hit harder by the Delta wave last summer, and gross domestic product contraction in the second and third quarters.

"Given that improvement in the labour market tends to lag that of the broader economy, it is not unreasonable to assume that labour markets are in less than solid shape."

Rogers said what this all means is that the best the emerging world can hope for this year is a growth recession.

That is, economies will grow, but at rates so meager that labour markets cease to improve or go into reverse.

While emerging economies are less reliant on consumer spending, the analysis said on average, than their counterparts in the advanced world, consumers make up a larger part of the economy than they used to, and they are growing in importance.

Even if central banks manage to tame inflation -- whether because supply-chain and conflict-related disruptions ease up or because central bankers squeeze it out of the economy by force -- the best-emerging markets can hope for is modest growth with little momentum in jobs, it added.