Korea’s new president Lee Jae-myung faces an uphill battle to revive the flagging economy. GDP shrank in Q1 and early Q2 data suggest the economy may already be in recession. The stage is set for a sizeable fiscal stimulus, which given the country’s strong finances is easily affordable. A key challenge will be keeping public finances in check over the longer term as the country’s population ages rapidly.
Elsewhere, Indonesia unveiled a US$1.5bn stimulus package, but at just 0.1% of GDP it will do little to lift growth. With fiscal space limited, monetary easing will have to do the heavy lifting in the months ahead.
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