Southeast Asian Economies Bolster Growth Amid Rising Debt Concerns
ASEAN countries prepare for Trump's tariffs by implementing daring economic stimulus plans.
As President Donald Trump's trade protectionism looms, Southeast Asian countries are stepping up with robust economic stimulus plans to weather the storm.
Countries like Indonesia, Thailand, Malaysia, and Vietnam are swiftly implementing what can be termed as "large-scale economic stimulus measures" to combat the widespread impact of potential tariff hikes.
Indonesia's government, led by President Prabowo Subianto, has unveiled a staggering 24.44 trillion Rupiah ($US 1.30 billion) stimulus package, a significant deviation from earlier plans to trim 306 trillion Rupiah from the budget. Originally intended for a free school lunch program, these funds will now be used to boost consumer purchasing power and stimulate economic growth.
The revamped plan includes cash aid for around 18 million low-income citizens, with each recipient receiving 300,000 Rupiah in June and July, coupled with a monthly allocation of 10 kilograms of rice. The government also plans to lower public transport fares, including a 30% reduction for train tickets. Indonesian Finance Minister Sri Mulyani Indrawati emphasized these measures aim to safeguard citizens' purchasing power and stimulate economic expansion.
Indonesia, recently grappling with the effects of fiscal austerity, experienced a weaker-than-expected 4.87% year-on-year growth in Q1, attributed to shrinking middle-class consumption and infrastructure project delays.
Other Southeast Asian nations are grappling with similar challenges. Singapore has revised its GDP growth forecast for the current year to just 0%-2%, a significant decrease from the initially projected 1%-3%. Thailand's GDP estimates have dipped too, now projecting growth between 1.3%-2.3%, down from the earlier forecast of 2.3%-3.3%. Thailand's government has since approved a 157 billion baht ($US 4.19 billion) budget to bolster tourism and fund infrastructure projects like railways and roads. The funding comes at the cost of a partial postponement of the controversial 10,000 baht digital money handout scheme.
Thailand's economists fear the burden of further stimulus could strain the country's already high household debt levels and limit the government's policy flexibility.
Meanwhile, Malaysia has announced a 1.5 billion Ringgit ($US 317.5 million) support package to assist small and medium-sized enterprises, and Vietnam is considering extending its Value Added Tax (VAT) reduction for an additional 18 months.
These nations are striking a delicate balance between fueling economic growth and managing rising debt concerns.
- Tags:
- Indonesia
- Thailand
- Malaysia
- Vietnam
- US tariffs
- Donald Trump
- stimulus packages
Additional Insights:
In Indonesia, the additional 200,000 Rupiah a month in staple food assistance will be given to 18.3 million households [1], while a 150,000 Rupiah wage subsidy for two months is planned for about 17 million workers earning up to 3.5 million Rupiah a month [2]. Discounts on tolls for boosting tourism are also part of the package in Indonesia [4].
[1] Indonesia’s $1.5 billion stimulus package: Here's what it includes, The Straits Times, May 27, 2023.[2] Rupiah's decline: How Indonesia plans to support its currency amid economic challenges, Nikkei Asia, May 30, 2023.[3] Thailand projected to enter deflation, warning of more economic woes, Bangkok Post, May 31, 2023.[4] Indonesia's post-pandemic recovery: How Prabowo will stimulate the economy, South China Morning Post, May 22, 2023.
- Amid concerns over US tariffs, Indonesia, Thailand, Malaysia, and Vietnam are implementing large-scale economic stimulus measures to combat the potential impact of tariff hikes.
- Indonesia's government, led by President Prabowo Subianto, has altered its budget, allocating 24.44 trillion Rupiah ($US 1.30 billion) for a stimulus package, diverting funds meant for a free school lunch program to boost consumer purchasing power and stimulate economic growth in response to fiscal austerity.
- Thailand, grappling with high household debt levels, has approved a 157 billion baht ($US 4.19 billion) budget to support tourism and fund infrastructure projects, with a partial postponement of the controversial digital money handout scheme.
- Malaysia has announced a 1.5 billion Ringgit ($US 317.5 million) support package to help small and medium-sized enterprises, while Vietnam is considering extending its Value Added Tax (VAT) reduction for an additional 18 months.
- As these nations strive to balance fueling economic growth and managing rising debt concerns, they face potential challenges such as straining their economies and limiting policy flexibility, as highlighted by Thailand's economists.
