THE government’s efforts to shield consumers from rising fuel and electricity costs could come at the expense of its fiscal position, Fitch Ratings said, as global energy shocks increasingly shift financial pressure onto the public sector.
In a report, the debt watcher said that governments across Asia-Pacific (APAC), including the Philippines, had stepped in to cushion households and businesses from elevated energy prices through subsidies, price controls and other support measures.
While these interventions help limit the immediate economic impact, they also transfer costs that would otherwise be borne by consumers and companies onto state balance sheets.
“Price controls, which limit the immediate pass-through of global energy prices, distort market signals and can defer rather than remove credit stress,” Fitch said.
The Philippines, which relies heavily on imported fuel, is particularly exposed to swings in global oil prices. To mitigate the impact on transport operators and vulnerable sectors, the government has rolled out fuel subsidies and other targeted forms of assistance.
Countries like Pakistan and Thailand, meanwhile, have also allowed domestic fuel prices to adjust, while others like Indonesia and India have kept pump prices relatively steady. China raised gasoline and diesel prices, but not enough to match the full increase in costs.
Fitch warned that continued intervention may narrow the government’s fiscal space, especially as global energy markets remain volatile.
“These actions, while supporting near-term affordability, can weaken profitability for refiners, fuel distributors and power-sector entities if compensation is delayed or incomplete,” it said.
Moreover, Fitch said fiscal support was absorbing a large share of the shock in several economies.
It cited Vietnam, which extended its fuel tax suspension until end-June and removed import tariffs temporarily, and Malaysia’s monthly subsidy bill.
Singapore also raised its corporate tax rebate to 50 percent and introduced about SGD1 billion in relief measures, while Sri Lanka approved a Rs100 billion support package. India also waived customs duties on 40 petrochemical products and cut excise taxes on fuel.
These interventions are moderating inflation and supporting demand, but Fitch warned that prolonged reliance on fiscal measures could weaken government flexibility, particularly after pandemic-related spending had already strained public finances.
In addition, several governments have introduced administrative curbs and demand-management measures to address supply pressures. Fitch said these interventions could intensify if the energy shock persists, increasing policy risks across the region.
“Most APAC policymakers are prioritizing social and macro stability over full price transmission,” it said.
“That should mitigate near-term pressures on the private sector, but the burden is migrating from consumers to public finances, regulated energy systems and state-linked issuers.”
