The pandemic has exposed grossly under-resourced public health and social protection systems, with more people needing health care to save lives and social protection to get them through the day while their work and incomes are at a halt. Getting by has been tougher than ever for daily wageworkers, smallholder farmers, women workers in precarious jobs and many others. 

The nations in the region need more resources than ever to ramp up and maintain public goods like universal health care and social protection. Even before the pandemic, however, many ASEAN nations have been struggling to raise sufficient revenue for essential public services that are proven to promote the wellbeing of millions.

That seven of the ASEAN member states have suffered persistent budget deficits for long periods highlights the region’s fiscal woes. Malaysia, Myanmar and Laos have been in the red throughout the past two decades, while Vietnam, Cambodia, Indonesia and the Philippines have only managed to avoid a deficit for four years in 2000-2020 at the most.

In 2018, six out of the 10 ASEAN countries had budget deficits, with some also burdened by high public debt. On average, the ASEAN region saw a budget deficit of 1.5 percent of gross domestic product (GDP), with many national deficits escalating unsustainably. All ASEAN countries will likely face budget deficits in 2020 at an average 4.2 percent of GDP.

Deficits, and consequently public debt, will increase further because of the additional resources mobilized to overcome the pandemic. Expected spending on COVID-19 response is enormous: Singapore and Thailand will spend respectively 13 percent and 9 percent of GDP on fiscal stimulus, while the Philippines, Indonesia and Vietnam will put in about 3 percent of GDP. At the same time, sharply falling tax revenues due to crippled economic activity will further erode the bottom lines.

ASEAN nations have been unable to achieve the desired domestic revenue mobilization targets, despite sustained economic growth and large foreign direct investment during the past two decades. For instance, overly generous corporate tax incentives offered without cost-benefit analysis have eroded the domestic revenue base. Due to such redundant and harmful tax incentives, essential revenues that could go into improving the lives of millions have been drained away.

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