In the first quarter of this year, five Southeast Asian economies, including Indonesia and Thailand, experienced a slowdown in growth. Among them:
Indonesia: GDP grew by 4.87% year-on-year in the first quarter, the weakest growth since the third quarter of 2021.
Thailand: Economic growth in the first quarter was 3.1%, slower than the growth rate in the fourth quarter of last year. Thailand has also revised its median growth rate for the whole year to around 1.8%. The country faces internal challenges such as weak domestic demand and high household debt, while externally, US tariffs continue to impact the Thai economy. Thai Prime Minister Pethongtan described the situation as a “global economic crisis.”
Impact of US Tariffs
The tariffs imposed by the United States on Indonesia and Thailand, apart from the 10% benchmark tariff, have not yet officially taken effect. However, they have already partially increased import and production costs and affected capital flows. Chen Li noted that Thailand and Indonesia’s high dependence on US exports is expected to lead to declines in exports, increases in import costs, decreases in corporate profits, and capital outflows, which could significantly drag down the economic growth of both countries.
Economic Stimulus Plans
To mitigate the impact of US tariffs, countries like Indonesia and Thailand are rolling out large-scale economic stimulus plans:
Indonesia: The country has formulated an economic stimulus plan worth 24.44 trillion Indonesian rupiah (about 1.5 billion US dollars), scheduled to be implemented during the school holidays from June to July. The plan aims to boost consumption and promote economic growth. Some analyses suggest that this stimulus plan is not just a short-term economic relief but also highlights the strategic positioning of expanding domestic demand as a long-term growth engine.
Thailand: The country has recently approved an economic stimulus plan with a budget of 157 billion Thai baht. The plan focuses on promoting community economies and tourism, strengthening agriculture and infrastructure, and expanding low-interest loans to small businesses.
Vietnam: The government is reportedly considering extending the VAT exemption period beyond the end of June.
Expert Concerns
Some experts, however, express concerns about the potential pitfalls of these stimulus measures:
Zhang Yugui: The economic impact of US tariff policies on Southeast Asian countries like Indonesia is mainly reflected in the shock to growth expectations. However, in terms of normal economic operations, stimulus policies could disrupt the inherent functioning of the economy. If the measures are too aggressive, they could lead to structural imbalances and distort the wealth distribution mechanism.
Chen Li: Thailand’s economic stimulus policies primarily focus on fiscal expansion and monetary easing. However, given the slowdown in global demand, the insufficient growth momentum of Thailand’s domestic industry, and the constraints of household debt on domestic consumption, the effectiveness of the economic stimulus plan may be very limited.
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