If War Cracks Budgets, Watch Indonesia First |
The oil-price surge is jeopardizing more than low interest rates. Budgets in Southeast Asia are likely to come under severe pressure. Leaders will be pushed to boost subsidies and dispense cash handouts to offset the hit to voters' wallets. In few places is the strain greater or potentially more far-reaching than in the region’s biggest economy, Indonesia.
The constraints that keep Jakarta’s fiscal deficit within a statutory limit of 3% of gross domestic product, one of the few surviving legacies of the 1990s financial crisis, are besieged. This comes at the worst possible time, with the credibility of President Prabowo Subianto's team found wanting. The currency, the rupiah, is languishing, foreigners are unloading bondsBloomberg Terminal, and stocks are down by almost a fifth this year.