Energy shock weighs on Asia-Pacific growth momentum

Overview

This report is Goldman Sachs’ tracking of growth and financial conditions across Asia-Pacific economies. Its core conclusion is that the energy supply shock is slowing regional growth. The report covers March PMI, February and some March hard data, GS Current Activity Indicators, and changes in financial conditions across economies. Because most hard data still stop at February, the report specifically distinguishes between pre-war weakness and the impact of the Iran war’s energy price shock as reflected in March PMI.

Core views

Goldman Sachs believes Asia-Pacific growth momentum has clearly weakened under the energy shock. March PMI declined in most countries, new orders generally softened, and price indices — especially input prices — moved higher, indicating both slower growth and persistent cost pressure. On financial conditions, the region tightened overall, but with clear divergence: tightening was faster in India, Indonesia, and the Philippines; Korea and Taiwan tightened only modestly; while Thailand and Malaysia saw some easing.

Analysis framework

The report cross-validates with high-frequency activity indicators and financial conditions indicators: first examining PMI, new orders, and price subcomponents; then using GS Current Activity Indicators to assess real economic activity; and finally explaining cross-country differences with financial conditions indices, exchange rates, equity markets, and policy responses.

Methodology notes

• macro_nowcastingGS Current Activity Indicators

  Current Activity Indicators

  Goldman Sachs uses CAI to measure near-real-time changes in economic activity; the report shows 3-month averages to smooth short-term volatility and make comparison with GDP data easier.

• financial_conditionsFinancial Conditions Index

  Financial Conditions Index

  The report measures the combined impact of exchange rates, equity markets, market interest rates, and policy expectations on the economy through changes in financial conditions, and compares each economy’s sensitivity to the energy shock.

• business_cyclePMI

  Purchasing Managers' Index

  The report uses March manufacturing and services PMI, new orders, and price indices to judge marginal changes in growth momentum and inflation pressure.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Asia-Pacific FX

  Energy price shocks affect exchange rates through trade conditions and policy pressure to prevent depreciation.

  Strengths

  Some economies can buffer pressure through policy intervention or export resilience.

  Weaknesses

  Economies more sensitive to energy shocks, such as India, Indonesia, and the Philippines, face more visible exchange-rate and financial-conditions pressure.

  Comparison

  Thailand and Malaysia actually saw financial conditions ease, highlighting regional divergence.

  Risks

  Further rises in energy prices could intensify currency depreciation and expectations of tighter policy.

• Asia-Pacific equities

  Tighter financial conditions and slower growth tend to suppress equity risk appetite.

  Strengths

  Korea and Taiwan previously benefited from equity-market gains that significantly eased financial conditions, and tech exports support Korea.

  Weaknesses

  Some markets have already seen tighter conditions due to falling equity prices and expectations of policy tightening.

  Comparison

  Korea and Taiwan saw smaller tightening, while India, Indonesia, and the Philippines tightened more sharply.

  Risks

  If new orders continue to weaken or energy costs keep rising, earnings expectations may come under pressure.

• Energy-related macro exposure

  The energy supply shock is the core trigger for this round of slower growth and higher price pressure.

  Strengths

  Net energy exporters such as Malaysia are relatively better off or less affected.

  Weaknesses

  Net energy importers are more vulnerable to deteriorating trade conditions and imported inflation.

  Comparison

  Malaysia’s manufacturing PMI was one of the few exceptions, reflecting the differences brought by its energy-export profile.

  Risks

  If the Iran war and energy supply disruptions persist, the slowdown in growth and tightening in financial conditions will last longer.

Key data

• Report date2026-04-09The report was published on 9 April 2026 | 2:51PM HKT.
• India services PMI57.5Although services PMI weakened across the major economies, India’s reading remained relatively strong.
• PMI directionWeakening across most countriesMarch PMI weakened in almost every country, new orders were generally soft, and price indices — especially input prices — rose.
• Manufacturing PMI exceptionsMalaysia, KoreaMalaysia is a net energy exporter; Korea benefited from strong tech exports and support from caps on retail fuel prices.
• Change in financial conditionsTightening overall but with divergenceTightening was more pronounced in India, Indonesia, and the Philippines; Korea and Taiwan tightened only slightly; Thailand and Malaysia eased somewhat.

Impact & implications

The energy shock is creating a dual pressure on Asia-Pacific economies: on one hand it is weakening demand and new orders, and on the other it is pushing up input prices and limiting policy room. Economies with higher energy import dependence, exchange-rate pressure, and a policy need to limit currency depreciation face greater macro pressure. Economies with energy-export characteristics, export structures supported by the technology cycle, or policies that can smooth fuel prices are relatively more resilient.

Risks

• The energy supply shock persists or expands, pushing energy prices even higher.
• Weaker new orders and rising input prices may combine into a slower-growth, higher-inflation mix.
• Policy makers tightening policy to limit currency depreciation could further suppress domestic demand.
• There is a timing gap between February hard data and March PMI, and subsequent hard data may confirm or revise the current weakness signal.

What to watch

• Whether subsequent March and April hard economic data confirm the slowdown shown in PMI.
• The latest direction of GS CAI and FCI data.
• Exchange-rate pressure, policy responses, and equity-market performance in India, Indonesia, and the Philippines.
• Whether energy prices and Iran-war-related supply risks ease.
• Whether Korea’s tech exports and Malaysia’s energy exports continue to buffer growth.