Asian countries are well-suited to handle the sharp rise in public debt – with some exceptions, says Bred Setser.

CNA
Date: 21 Jun 2020
By: Brad Setser

NEW YORK CITY: Social distancing has become the primary tool for protecting public health amid the coronavirus pandemic, and its inevitable impact on economic life has required governments to provide income and support to those who can no longer work, even as spending on public health rises.

Nearly all governments globally are now running large fiscal deficits, and a sharp rise in the stock of public debt globally is expected.

Asian countries, though, are well-suited to handle this increase in public debt – with some exceptions.

FISCAL SURPLUSES OF TAIWAN AND SOUTH KOREA

Economies like Taiwan and South Korea have it relatively easy. Taiwan was running a 10.5 per cent of GDP current account surplus before the virus, using its high level of savings to invest around the world. Its life insurers in particular were big buyers of risky global bonds.

Thanks to an effective public health response, Taiwan appears likely to avoid the kind of economic shock experienced by Europe and the United States.    [FULL  STORY]