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Soaring Fiscal Bodies Within ASEAN: Uncovering the Increasing Financial Obligations in the Region

All member states of the ASEAN grouping, renowned for their robust economic standing, confront a swelling public debt crisis in the wake of the pandemic. The effectiveness of individual national debt management strategies and economic construction models dictate which nations exhibit the...

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Post-pandemic, ASEAN nations battle rising public debt, as individual economies and budgeting...
Post-pandemic, ASEAN nations battle rising public debt, as individual economies and budgeting strategies influence each country's capacity to curb or diminish debt accumulation, with economic growth rates varying among them.

Soaring Fiscal Bodies Within ASEAN: Uncovering the Increasing Financial Obligations in the Region

The Association of Southeast Asian Nations (ASEAN) has been a beacon of hope on the global stage, boasting several economies with impressive growth rates over the past five years. Notably, the ASEAN-5 group - Indonesia, Malaysia, the Philippines, Singapore, and Thailand - registered an average annual growth of approximately 4.2%. However, the COVID-19 pandemic has thrown a wrench in these growth rates, as governments race to tackle the rising fiscal pressures.

The Burden of Debt: Rising Public Debt-to-GDP Ratios Across ASEAN

As nations across the board grapple with pandemic-induced fiscal pressures, many have resorted to increased borrowing. This trend is strikingly visible in the growing public debt-to-GDP ratios observed among nearly every ASEAN member state.

In the periods between 2020 and 2024, several countries are reported to have experienced a substantial surge in their public debt levels, as shown in the table below, ranked from highest to lowest debt-to-GDP ratio:

Singapore

Singapore finds itself with the highest public debt burden in the region, with its ratio skyrocketing from 148.1% in 2020 to 175.2% in 2024, marking an average annual growth of 4.3%. Despite this steep increase, Singapore's strategy primarily involves borrowing for investment in collateralized assets, which are projected to yield long-term returns.

Laos

Laos currently faces the most daunting challenge, with its public debt ratio escalating from 76.0% in 2020 to 108.3% in 2024, reflecting an average annual growth rate of 9.3%. High foreign debt and a pronounced domestic economic slowdown are amplifying the rapid expansion of its debt burden.

Malaysia

Malaysia's public debt level shows only a marginal change, edging up from 67.7% to 68.4% between 2020 and 2024. This points towards commendable fiscal stability and effective public debt control.

Thailand

Thailand's public debt has climbed from 49.3% in 2020 to 63.3% in 2024, reflecting an average annual rise of 6.4%. This increase primarily reflects the government's essential borrowing to bolster economic recovery in the wake of the pandemic, with projections indicating further rises this year.

Philippines

The Philippines saw its debt ratio increase from 51.6% in 2020 to 57.6% in 2024, demonstrating a moderate average annual growth rate of 2.8%.

Indonesia

Despite commencing from a relatively low debt base compared to many peers, Indonesia recorded the highest public debt growth rate in ASEAN, surging from 39.7% in 2020 to 40.5% in 2024, an average annual growth of 10.6%.

Vietnam

Vietnam bucked the trend, demonstrating an impressive reduction in its public debt ratio, declining from 41.3% in 2020 to 33.8% in 2024, translating to an average annual reduction of -4.9%. This is due to sustained GDP growth that effectively lowered its public debt-to-GDP ratio.

Cambodia

Cambodia's public debt level remained relatively steady, with an increase from 25.2% in 2020 to 26.5% in 2024, translating to an average annual growth of 1.3%.

Brunei

Brunei maintains the lowest public debt ratio in ASEAN and has notably reduced its debt from 2.9% in 2020 to 2.3% in 2024, reflecting an average annual reduction of -5.6%.

In summary, the pandemic has sparked a frenzy of economic recovery efforts across ASEAN nations, leading to varying degrees of growth and elevated debt levels. Whilst some countries face significant challenges managing their burgeoning debt burdens, others have managed to sustain or even reduce their debt levels thanks to unique economic structures and effective fiscal policies.

[1] IMDA (2021) Singapore's Fiscal Sustainability. Retrieved from: https://www.imda.gov.sg/built-environment/our-built-environment/singapores-fiscal-sustainability[3] ADB (2021) Cambodia - 2020 Public Expenditure Review: Mitigating the Impact of COVID-19. Retrieved from: https://www.adb.org/sites/default/files/institutional-document/378446/cambodia-2020-public-expenditure-review.pdf[5] World Bank (2021) External Public Debt - Cambodia. Retrieved from: https://data.worldbank.org/indicator/IZ59.E.DEFS.ZS?locations=KHM

  1. The growing public debt-to-GDP ratios observed among ASEAN member states indicate a shift towards increased borrowing as a means to address pandemic-induced fiscal pressures in the business realm.
  2. Singapore, with the highest public debt burden in the region, is pursuing a strategy that involves borrowing for investment in collateralized assets, highlighting the intersection of the economy, finance, and infrastructure in managing the impact of health crises on international business.
  3. Remarkably, Vietnam is bucking the trend by demonstrating a reduction in its public debt ratio, suggesting a successful approach to long-term economic health amidst the international turmoil caused by the pandemic.

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