CLSA says China may turn to Indonesia for coal when Russian exports are disrupted

CLSA’s Anthony Nafte said Russia’s war in Ukraine is unlikely to have an even effect across Southeast Asia.

Many economies in the region are net oil importers and could come under “quite a lot of pressure,” Nafte told CNBC’s “Street Signs Asia” on Wednesday. He noted that the recent spike in commodity prices was “much higher” than anticipated and could be prolonged.

Commodity prices have risen sharply since Russia invaded Ukraine, with Oil prices hit levels not seen since 2008. Russia is a major oil producer while Ukraine is a major exporter of other commodities such as wheat and corn.

However, Indonesia can “really do reasonably well” in the current environment driven by a commodity-driven economy, according to Nafte, senior economist at CLSA.

“More than 50% of their exports are commodity-based, and now you’re in a position where your commodity prices will stay higher in the long run,” Nafte said.

For example, Russia is now China’s second-biggest supplier of coal, he said, and the disruption could cause Beijing to turn to Indonesia to fill the gap.

“Indonesia will benefit from the price effect but also in terms of volume,” Nafte said.

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Thailand’s economy, on the other hand, is at “the other extreme,” he said.

Current conditions continue to plague exports and tourism, Thailand’s biggest economic drivers, “for the rest of the year,” the economist said.

“This disruption to global trade will be a big headwind for exports,” he said. “In terms of tourism recovery, I think 2022 is too early. There are still a lot of problems.”

Thailand’s balance of payments also faces the “biggest gap” among emerging Southeast Asian economies, he added.

“They ran a large current account deficit last year due to the loss of tourism revenue, and their exchange rate looks particularly vulnerable,” Nafte said.

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