Spending Spree

March 31, 2008

The Philippines under President Gloria Arroyo may discard plans to balance its budget this year as the government accelerates investment in public works and social services.

Thailand is spending 1.5 trillion baht (Rm 150.39 billion) to expand mass transportation and improve health care.

Hong Kong is cutting taxes.

Singapore is handing out cash straight to its citizens.

As global demand and exports are slowing down, most countries in South East Asia are trying to boost domestic demand and consumption. The slowdown in global economic growth will hit Asia the hardest as Asian countries are twice as reliant on overseas sales that amounts to 60% of Asian shipments.

However, pumping too much cash into the economy to boost growth is not risk-free. In the 1990s, the Japanese government’s attempt to spend its way out of recession left the nation with the world’s biggest public debt and miles of little used roads and bridges.

Furthermore, spending too much would risk and overheating economy that will only serve to provoke inflationary pressures.

Governments should spend. But spend wisely.

Source:The Malaysian Reserve

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