Singapore, Malaysia, Indonesia unleash cash to ease inflation bite
Singapore, Malaysia, Indonesia unleash cash to ease inflation bite
https://asia.nikkei.com/Economy/Inflati ... 2&si=44594
Singapore, Malaysia, Indonesia unleash cash to ease inflation bite
Governments attempt to balance political pressures with fiscal discipline
A woman shops at a supermarket in Singapore. Food prices have surged in Southeast Asia. (Photo by Takashi Nakano)
TAKASHI NAKANO, Nikkei staff writerJuly 6, 2022 04:34 JST
SINGAPORE -- Southeast Asian governments have started to roll out another round of economic relief packages to help citizens stay afloat in difficult economic times, but this time the funding is targeting the fallout from inflation instead of COVID-19.
Across the region, people are struggling to make ends meet as the Ukraine war as well as persistent supply chain disruptions have driven up the prices of everyday items. With several countries getting ready to hold elections in the next 18 months, officials have made moves to disperse cash before people vote with their wallets.
Singapore has announced a stimulus measure worth 1.5 billion Singapore dollars ($1.07 billion) that assists households and small businesses. Individuals earning SG$34,000 or less a year will receive as much as SG$300 in August. Taxi drivers and couriers struggling with high fuel prices will receive payments between SG$150 and SG$300.
All households will also receive a SG$100 utility credit. In addition, the government will provide financial subsidies for small and midsized food manufacturers and retailers that adopt fuel-efficient equipment.
In Malaysia, Prime Minister Ismail Sabri Yaakob said households in the bottom 40% income bracket will receive payments of 100 ringgit ($22.65) while individuals in that same bracket will receive 50-ringgit payments.
Relief payments will total 630 million ringgit, benefiting 8.6 million people. The government also froze hikes on electricity and water fees on June 24.
The Thai government has granted a three-month extension to ongoing relief measures, which will now run until September. Assistance includes cooking gas subsidies for low-income people.
In Indonesia, the cash payments are being directed to roughly 20 million households and 2.5 million street food vendors in response to surging cooking oil prices.
These measures come amid historically high inflation rates. Thailand's consumer prices rose 7.66% in June from a year earlier, marking a 14-year high. Singapore's consumer prices in May jumped 5.6%, the fastest pace in more than 10 years.
"The support measures in this package are tilted toward helping our lower-income and vulnerable groups, because they are the ones who are disproportionately impacted by the effects of inflation," Lawrence Wong, Singapore's minister of finance and deputy prime minister, said when announcing the support package last month.
There is also a political wrinkle to the relief measures. Malaysia and Thailand will hold general elections by the end of 2023. Governments often take the blame for inflation and the lower quality of living that can come with it.
Malaysian Prime Minister Ismail Sabri said last month that the price caps on chicken that were due to expire in July will be kept in place to "safeguard the interests" of the Malaysian people.
In Singapore, Wong has been appointed as the successor of the current Prime Minister Lee Hsien Loong. As such, Wong is leading the relief rollout.
"You have my word that if the situation worsens significantly, we will be prepared to do more, especially to provide targeted help for the lower-income groups," Wong told lawmakers on Monday.
However, the additional relief packages risk damaging national finances already strained by the pandemic response. Some countries have already begun to show signs of lax fiscal discipline.
Last year, Thailand raised the cap on government debt to 70% of gross domestic product from 60%. That same year, Malaysia raised the debt ceiling to 65% of GDP from 60%.
"Southeast Asian countries have relatively low shares of debt that are denominated in foreign currencies, so there will be no problems in terms of short-term funding," said Hiromasa Matsuura, senior economist at Mizuho Research & Technologies. "However, interest rates are expected to rise, so care needs to be taken toward additional fiscal burdens."
The Thai baht has sunk to a five-and-a-half-year low against the U.S. dollar. Concerns over economic stagnation caused by inflation, as well as over deteriorating fiscal conditions, could lead to a weaker currency and accelerated capital outflows.
Singapore plans to fund its SG$1.5 billion economic relief package with additional tax revenue. The government has committed to go ahead with plans to hike the national sales tax on next year and in 2024, despite inflationary pressures.
According to Malaysia's 2023 budget proposal released last month, the financial subsidies will not be universal. Instead, the government is set to take a "more targeted approach" that focuses on vulnerable income level groups.
A prolong conflict between Russia and Ukraine may lead to long-term high food and energy prices. Those least able to weather these trends are becoming increasingly impatient.
"A single cash payment is not going to erase my struggles," said Latifah Ismaill, a janitor in Singapore.
Singapore, Malaysia, Indonesia unleash cash to ease inflation bite
Governments attempt to balance political pressures with fiscal discipline
A woman shops at a supermarket in Singapore. Food prices have surged in Southeast Asia. (Photo by Takashi Nakano)
TAKASHI NAKANO, Nikkei staff writerJuly 6, 2022 04:34 JST
SINGAPORE -- Southeast Asian governments have started to roll out another round of economic relief packages to help citizens stay afloat in difficult economic times, but this time the funding is targeting the fallout from inflation instead of COVID-19.
Across the region, people are struggling to make ends meet as the Ukraine war as well as persistent supply chain disruptions have driven up the prices of everyday items. With several countries getting ready to hold elections in the next 18 months, officials have made moves to disperse cash before people vote with their wallets.
Singapore has announced a stimulus measure worth 1.5 billion Singapore dollars ($1.07 billion) that assists households and small businesses. Individuals earning SG$34,000 or less a year will receive as much as SG$300 in August. Taxi drivers and couriers struggling with high fuel prices will receive payments between SG$150 and SG$300.
All households will also receive a SG$100 utility credit. In addition, the government will provide financial subsidies for small and midsized food manufacturers and retailers that adopt fuel-efficient equipment.
In Malaysia, Prime Minister Ismail Sabri Yaakob said households in the bottom 40% income bracket will receive payments of 100 ringgit ($22.65) while individuals in that same bracket will receive 50-ringgit payments.
Relief payments will total 630 million ringgit, benefiting 8.6 million people. The government also froze hikes on electricity and water fees on June 24.
The Thai government has granted a three-month extension to ongoing relief measures, which will now run until September. Assistance includes cooking gas subsidies for low-income people.
In Indonesia, the cash payments are being directed to roughly 20 million households and 2.5 million street food vendors in response to surging cooking oil prices.
These measures come amid historically high inflation rates. Thailand's consumer prices rose 7.66% in June from a year earlier, marking a 14-year high. Singapore's consumer prices in May jumped 5.6%, the fastest pace in more than 10 years.
"The support measures in this package are tilted toward helping our lower-income and vulnerable groups, because they are the ones who are disproportionately impacted by the effects of inflation," Lawrence Wong, Singapore's minister of finance and deputy prime minister, said when announcing the support package last month.
There is also a political wrinkle to the relief measures. Malaysia and Thailand will hold general elections by the end of 2023. Governments often take the blame for inflation and the lower quality of living that can come with it.
Malaysian Prime Minister Ismail Sabri said last month that the price caps on chicken that were due to expire in July will be kept in place to "safeguard the interests" of the Malaysian people.
In Singapore, Wong has been appointed as the successor of the current Prime Minister Lee Hsien Loong. As such, Wong is leading the relief rollout.
"You have my word that if the situation worsens significantly, we will be prepared to do more, especially to provide targeted help for the lower-income groups," Wong told lawmakers on Monday.
However, the additional relief packages risk damaging national finances already strained by the pandemic response. Some countries have already begun to show signs of lax fiscal discipline.
Last year, Thailand raised the cap on government debt to 70% of gross domestic product from 60%. That same year, Malaysia raised the debt ceiling to 65% of GDP from 60%.
"Southeast Asian countries have relatively low shares of debt that are denominated in foreign currencies, so there will be no problems in terms of short-term funding," said Hiromasa Matsuura, senior economist at Mizuho Research & Technologies. "However, interest rates are expected to rise, so care needs to be taken toward additional fiscal burdens."
The Thai baht has sunk to a five-and-a-half-year low against the U.S. dollar. Concerns over economic stagnation caused by inflation, as well as over deteriorating fiscal conditions, could lead to a weaker currency and accelerated capital outflows.
Singapore plans to fund its SG$1.5 billion economic relief package with additional tax revenue. The government has committed to go ahead with plans to hike the national sales tax on next year and in 2024, despite inflationary pressures.
According to Malaysia's 2023 budget proposal released last month, the financial subsidies will not be universal. Instead, the government is set to take a "more targeted approach" that focuses on vulnerable income level groups.
A prolong conflict between Russia and Ukraine may lead to long-term high food and energy prices. Those least able to weather these trends are becoming increasingly impatient.
"A single cash payment is not going to erase my struggles," said Latifah Ismaill, a janitor in Singapore.
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