Interest rates on the rise . . .
Many Southeast Asian countries have kept interest rates at record lows throughout the pandemic to encourage economic growth. But over the past few weeks, some governments have been raising rates to help manage inflation. Malaysia and the Philippines have hiked their interest rates twice. Indonesia and Thailand, meanwhile, have maintained their rates at record lows of 3.5 and 0.5 per cent, respectively. But Thailand has expressed an interest in allowing its currency to move with market forces as it pursues a liberalized foreign exchange policy. This despite the baht being at a six-year low and inflation accelerating at its fastest rate in 14 years. And Indonesia has kept rates low because it still sees its inflation as manageable, staying between two and four per cent, even though Malaysia and Singapore have responded to inflation in the same range.
Handouts to the vulnerable . . .
Aside from adjusting interest rates, some governments address inflation by directly assisting their citizens. In Singapore, a C$1.38-billion support package is being distributed to help lower-income and vulnerable groups combat rising prices during inflation. Funded by surpluses from the 2021 financial year, the package offers a mix of one-off benefits, increased temporary assistance, and permanent enhancements to existing schemes. Across the border in Malaysia, the government is handing out an estimated C$184 million in cash to low-income groups, the largest amount of aid ever given by any Malaysian government.
Tourism offers a solution . . .
Despite soaring prices, the region’s tourism industry is rebounding. The ease of travel restrictions is allowing tourism sectors to recover from the steep declines of the pandemic. The Philippines has experienced GDP growth of 8.3 per cent since travel restrictions were lifted after suffering one of the most significant economic declines in the pandemic. Even though inflation still impacts outbound tourists and their consumption while travelling, the successful rebound of the tourism industry so far is a hopeful sign in tough times.