South-east Asia may have to reduce food, fuel subsidies to save public purses

REGIONAL fuel and food subsidy schemes are headed for reform, as higher prices and pandemic expenses make it harder for South-east Asian governments to afford to maintain them at current levels, economists told The Business Times.

“The increase in commodity prices creates fiscal pressures on the governments to maintain their subsidies,” said Ho Woei Chen, an economist at UOB. “The governments’ fiscal policy options are already constrained by the stimulus spending over the last 2 years to mitigate the adverse impact of the Covid-19 pandemic.”

Granted, policymakers are unlikely to completely scrap the extensive subsidies, which have been crucial to cushioning consumers in markets like Malaysia, Indonesia and Thailand from the impact of runaway prices.