IMPACT ON GROWTH
The second concern is growth.
Higher energy costs raise production costs for firms. Global uncertainty can weaken external demand. Trade and shipping disruptions can affect supply chains and delivery times. Unlike earlier tariff-related risks, which were concentrated in externally-oriented sectors, this shock induced by the war could also spread more broadly into domestic-facing sectors through higher transport, logistics and operating costs.
Authorities on Tuesday warned that uncertainty remains high and the crisis in the Middle East is unlikely to be over anytime soon. From higher petrol and electricity prices to rising food costs, the effects are expected to broaden in the months ahead.
This is the deeper significance of the latest package. It is not just fiscal support for businesses and households. It is also an attempt to move before expectations become harder to manage and before cost pressures spread more widely through the economy.
That is why the real test still lies ahead. If the conflict drags on, the challenge will not simply be absorbing a first round of higher prices, but preventing those pressures from becoming embedded in business decisions, household behaviour and inflation expectations. The right response now is neither panic nor complacency, but this early action, targeted support and steady policy signalling.
Chua Yeow Hwee is an Assistant Professor in Economics at the Nanyang Technological University (NTU). He is also the Deputy Director of the Economic Growth Centre at NTU. The opinions expressed are those of the writer and do not represent the views and opinions of the institutions that he is in.
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