Which Southeast Asian Economy Breaks First?

Summary

The video stress-tests six Southeast Asian economies against three simultaneous shocks: oil near $110 per barrel, higher U.S. interest rates, and capital moving toward the U.S. dollar. It ranks the Philippines as most exposed, followed by Indonesia, while Singapore is least exposed.

The presenter stresses that the ranking measures exposure, not the probability of a crisis. By the external-debt and reserve indicators associated with the 1997 Asian crisis, none of the six appears comparably vulnerable.

Stress-Test Framework

The video compares Indonesia, Malaysia, the Philippines, Thailand, Vietnam, and Singapore using 10 indicators grouped into oil, foreign-currency resilience, government budgets, and market signals. Each country is ranked from 1 (most exposed) to 6, and the rankings are averaged. The results are also re-scored 26 other ways to test whether the rankings hold up.

The three shocks examined are:

1. Higher oil costs, paid in U.S. dollars.
2. Higher U.S. interest rates and Treasury yields, making dollar assets more attractive.
3. Capital outflows from local bonds and shares, which can weaken currencies and further raise the local cost of imported oil.

Country Rankings and Key Vulnerabilities

1. Philippines — Most Exposed

• Ranked first (most exposed) in 25 of 27 scoring approaches and worst on 5 of 10 indicators.
• September inflation was 7.2%, the fastest in 3½ years. Rice prices were up 20%, and nearly 24% for the poorest households.
• The IMF expected the country to spend abroad almost 5% of GDP more than it earns, a wider gap than in 1996.
• It had the widest budget deficit among the six. The peso was down 8.5% since the war, at a record low.
• The government’s 10-year borrowing cost rose almost 2 percentage points during the year, to 8%.
• The central bank had raised rates three times since April, despite growth being at its weakest outside the pandemic since 2009.
• Cushions: Foreign-exchange reserves exceed three times short-term foreign debt; foreigners own about 4% of government bonds; the peso is not pegged; and overseas remittances are about $36 billion a year.

2. Indonesia

• In June, the rupiah passed 18,000 per U.S. dollar, weaker than at any point in 1998. In October, the stock market had its worst day since 1998.
• The most popular subsidized petrol grade was held at 10,000 rupiah per litre. In the first nine months of the year, energy subsidies and compensation cost nearly 377 trillion rupiah, exceeding the budget deficit over that period.
• The government expected a deficit of about 2.85% of GDP; the legal ceiling is 3%.
• Its main vulnerability is the fuel-price freeze and resulting fiscal pressure. Subsidized petrol being more than a third cheaper than the next grade encourages demand to concentrate on it, increasing the impact of supply delays.
• Countervailing factor: Foreign ownership of government bonds fell from 40% in 2017 to under 13% by June, leaving less short-term foreign capital to flee.

3–4. Malaysia and Thailand — Close and Sensitive to Scoring

Malaysia

• Drivers paid 1.99 ringgit per litre for petrol in mid-October, versus an unsubsidized price of 4.62 ringgit. The pre-war unsubsidized price was 2.59 ringgit.
• The fuel-subsidy bill was expected to rise from 15 billion ringgit in the budget to about 40 billion—half the projected budget deficit and more than four-fifths of health spending.
• Offsetting strength: Malaysia is a net oil exporter. State oil company Petronas was expected to pay the government 27 billion ringgit that year; inflation was 1.8%.
• Vulnerability: Foreigners held about one-fifth of its government bonds, the highest share among the six.

Thailand

• The oil fuel fund, which helps keep diesel cheap, went from having money in February to 99 billion baht in debt by October 4, accumulating roughly 450 million baht of additional debt per day on average.
• Without the fund and a refinery discount, September diesel would have cost 54 baht per litre, versus 41 baht.
• Offsetting strength: Foreign-exchange reserves covered about eight months of imports, the highest among the six.
• Offsetting weakness: It had the slowest-growing economy among the six, and floods since September affected more than 3 million people.

5. Vietnam

• Growth was almost 10% last quarter, the fastest of the six; the dong had barely moved.
• Few foreigners own its government bonds, limiting the potential for a sudden foreign-bond selloff. In October, the central bank was urging banks to cut—not raise—interest rates.
• Main vulnerability: Reserves were estimated to cover only about two months of imports, less than half the coverage of any other country in the comparison. The video notes that Vietnam does not publish reserve data regularly, so this is an estimate.

6. Singapore — Least Exposed

• The IMF estimated its external surplus at almost 17% of GDP. The government ran a budget surplus, had no net debt, and did not subsidize petrol.
• The Singapore dollar had slipped only about 1% since the war.
• The stated weak spot was employment rather than external financing: the economy grew 5.4% last quarter, but second-quarter layoffs were the highest since 2020.

Market, Macroeconomic, and Historical Figures

• Brent crude rose from $72 per barrel on the last trading day before the war with Iran began in February to almost $110 on October 19, an increase of about 51%. The rise followed reports of tankers hitting mines in the Strait of Hormuz.
• The Federal Reserve raised rates in September; the U.S. 10-year Treasury yield reached 5.31%, its highest level in more than 20 years.
• Since the war began, Bank Indonesia had raised its rate by 1 percentage point and the Philippine central bank by ¾ of a point. On October 21, Bank Indonesia held its main rate at 5.75% but raised the rate paid on overnight bank deposits to 5%.

Historical Crisis Examples

• Sri Lanka, 2022: Usable central-bank reserves fell below $50 million. The country defaulted for the first time in its history, restricted fuel sales to essential services for two weeks, and saw inflation approach 70%.
• Indonesia, 1997–98: The rupiah lost about 85% of its value. Petrol prices rose 71% in May 1998 under an IMF rescue, followed by riots and President Suharto’s resignation less than three weeks later.
• The video contrasts current conditions with 1996: short-term foreign-bank loans to Indonesia were then almost twice its reserves, versus less than one-third now. For Thailand, they were once greater than reserves, versus less than one-tenth now.

The video describes present-day stress as more likely to appear gradually—in subsidy costs, fuel rationing, food and transport prices, and reduced fiscal room—rather than as a sudden 1997-style collapse.

Dates to Watch

• October 22: Philippine central bank.
• October 28: Federal Reserve and Bank of Thailand.
• November 5: Malaysia’s central bank.
• December 31: End of Indonesia’s promise not to raise subsidized fuel prices during the year.
• Ongoing: Strait of Hormuz tanker traffic; each successful passage was described as easing pressure on all six economies.

Assets, Instruments, Sectors, and Entities Mentioned

• Commodities and energy: Brent crude, oil, petrol/gasoline, diesel.
• Currencies: U.S. dollar, Indonesian rupiah, Malaysian ringgit, Philippine peso, Thai baht, Vietnamese dong, Singapore dollar.
• Financial instruments and markets: U.S. 10-year Treasuries, local government bonds, stocks/equities, central-bank policy rates, foreign-exchange reserves, short-term foreign debt.
• Sectors and economic exposures: Energy and fuel subsidies, oil exports, rice and food prices, transport, employment, health spending, and overseas remittances.
• Named company: Petronas, Malaysia’s state oil company. No stock tickers are given.

Recommendations, Cautions, and Disclosures

The video’s main caution is that the ranking is an exposure stress test, not a forecast of crisis odds. It says the Philippines is the most exposed on the selected indicators, Indonesia is close behind, and Singapore is least exposed; it does not conclude that any is close to repeating 1997.

No explicit “not financial advice” disclaimer appears in the subtitles.

Presenters and Sources

• Presenter/source: Dominomics; the narrator is not named in the subtitles.
• Sources cited in the subtitles: IMF; official and market data; Federal Reserve; Bank Indonesia; Philippine central bank and governor Eli Remolona; and government and state-company data referenced for subsidies and energy costs.