Asean nations brace for Trump tariffs with bold stimulus packages
- Illustrative photo: The Nation/ANN
BANGKOK: Southeast Asian nations are rolling out ambitious economic stimulus measures as they prepare for the potentially far-reaching impact of President Donald Trump's trade protectionism.
Countries including Indonesia, Thailand, Malaysia, and Vietnam are initiating substantial spending programmes, aiming to safeguard consumer purchasing power and spur growth, even as they acknowledge the associated risks of escalating national debt and potential cuts to government revenue.
According to Nikkei Asia, countries across the region are swiftly implementing what are being termed "large-scale economic stimulus measures" to counter the widespread effects of Trump's proposed tariff hikes.
In Indonesia, President Prabowo Subianto's government has unveiled a colossal 24.44 trillion Rupiah (approximately US$1.30 billion) stimulus package.
This marks a significant pivot from earlier plans this year to slash 306 trillion Rupiah from the budget, initially earmarked for a free school lunch programme.
As part of the new initiative, around 18 million predominantly low-income citizens are set to receive 300,000 Rupiah in cash aid in June and July, alongside a monthly allocation of 10 kilograms of rice.
The government is also planning substantial reductions in public transport fares, including a 30% cut for train tickets.
Indonesian Finance Minister Sri Mulyani Indrawati stated that these measures are designed to preserve citizens' purchasing power and promote economic expansion.
Indonesia has recently grappled with the effects of fiscal austerity, with its Gross Domestic Product (GDP) growing by a mere 4.87% year-on-year in the first quarter – its weakest performance since Q3 2021 – attributed to declining middle-class consumption.
The capital, Jakarta, has also seen hotel occupancy rates plummet by over 90% from pre-pandemic levels, while infrastructure spending has been significantly curtailed, leading to delays in highway construction projects.
Elsewhere in the region, Singapore has revised down its GDP growth forecast for the current year to between 0% and 2%, a decrease from its earlier projection of 1% to 3%.
Thailand has similarly adjusted its GDP estimates downwards, now projecting growth between 1.3% and 2.3%, a drop from its previous forecast of 2.3% to 3.3%.
Last month, the Thai cabinet approved a 157 billion baht (approximately US$4.19 billion) budget to boost tourism and fund infrastructure projects like railways and roads.
To secure funding for this package, the government has taken the decision to partially postpone its controversial 10,000 baht digital money handout scheme.
Economists in Thailand are wary, as the nation's household debt approaches 90% of GDP, fearing that further stimulus could exacerbate debt levels and restrict the government's policy flexibility.
In Malaysia, Prime Minister Anwar Ibrahim announced a RM1.5 billion (approximately US$317.5 million) support package in May, aimed at assisting small and medium-sized enterprises through low-interest loans and government-backed credit guarantees.
Meanwhile, Vietnam is considering extending its Value Added Tax (VAT) reduction for an additional 18 months beyond its scheduled June expiry.
However, concerns have been raised that prolonging the tax cut could negatively impact state revenue. - The Nation/ANN
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