Claire Jiao

Three of Asia’s most vulnerable economies are showing rising strains as their central banks come under pressure to tighten policy even as the economic hit from the Iran-war oil shock deepens.

Singapore’s economy expanded faster-than-expanded in the first quarter as the global artificial-intelligence boom lifted the nation’s manufacturing and services, offsetting the drag from higher crude prices.

Asia’s central banks face mounting pressure to tighten monetary policy as the region finds itself caught between an energy crunch and an AI boom, a combination that threatens to keep inflation elevated.

Inflation has decelerated in the Philippines and Thailand as global crude costs eased, giving their central banks more breathing room as they assess the need to further raise interest rates.

Indonesia spent much of this week confronting a question that might have seemed unthinkable a few short years ago: what happens when investors stop believing in Southeast Asia’s largest economy?

Grace Sihombing, Claire Jiao & Norman Harsono / Bloomberg

The surprise hike in Indonesia’s interest rates on Tuesday helped the rupiah rebound from a record low, but analysts say it likely won’t restore long-term investor confidence in President Prabowo Subianto’s management of the economy.

Indonesia’s central bank governor signaled it would allow bond yields to rise and left the door open for future interest-rate hikes during a roughly 90-minute call late Tuesday night with investors, seeking their return to Southeast Asia’s largest economy.

Fiscal and currency risks have likely passed in Indonesia, according to a Citigroup Inc. analyst who was once lambasted by the country’s finance chief for his forecasts.

Indonesia will exempt from legal and tax scrutiny purchases of bonds from sovereign wealth fund Danantara, a move the country’s finance minister said was designed to bring money back into the country without tracing its source.