As Asian economies take on public debt to combat Covid-19, who will foot the bill?

It’s a familiar scene: with each new surge governments impose tough restrictions then headline-grabbing fiscal injections

But fiscal firepower has its limits. Experts warn that while countries like Singapore may be able to stand the heat, others like the Philippines and Indonesia could get burnt – saddling the young with the burden

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A woman reads a newspaper in Singapore. Photo: Xinhua

Published: 11:00am, 10 Jul 2021Updated: 2:36pm, 12 Jul 2021

In May, when Singapore tightened its measures for four weeks to combat a surge in Covid-19 cases, it cost the government S$800 million (US$591 million) in relief measures. The money helped businesses, including fitness studios, performing arts organisations and eateries, survive that month of harsher rules.

Across the border, Malaysia recently unveiled a 150 billion ringgit (US$35 billion) package, made up of cash aid and wage subsidies, after extending a nationwide lockdown indefinitely.

In Southeast Asia, where most countries are battling new waves of infections driven by the more contagious Delta variant, these scenes have become all too familiar. With each fresh surge, governments impose tough restrictions and then come up with headline-grabbing fiscal injections to rescue their economies.

But as this cycle of uncertainty drags on, there are rising concerns that countries’ ability to continue throwing money at the situation is limited, and that the financial burden from the pandemic will be inherited by the younger generations. This worry is particularly pronounced in a region where the end-game seems unclear amid stalling vaccination drives.

Analysts paint a mixed picture of the region. Some say that while countries like Singapore, which is small and has much fiscal firepower, are likely to come through relatively unscathed others, like the Philippines and Indonesia, could end up with towering debts. They say the key for economies to recover lies in ramping up their vaccination programmes.

Motorists in Manila, the Philippines. Photo: EPA

Rising government debt

The pandemic has evidently taken a toll on economies. In the fourth quarter of 2020, global government debt accounted for 105 per cent of global GDP, up from 88 per cent in 2019, the highest level since the aftermath of World War II.

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