The Effects of Global Debt Problems on the ASEAN Economy

The Global Financial Crisis and the subsequent eurozone crisis magnified the large debt accumulated by developed countries, particularly the United States. There have been several stimulus attempts in the form of quantitative easing in both the United States and in Europe. However, the results have not been satisfactory. Limited growth in the developed regions will have an impact on ASEAN due to its dependency on exports. At present, ASEAN inter-country trade is low and is therefore unable to substitute for the loss of exports to developed economies. Thus, a new paradigm has to be created to provide other avenues of growth. The most probable drivers of growth come from two sources: empowering domestic consumers to boost consumption and spending; and intensifying trade with other countries in the region. The former policy should be designed in a manner where a rise in local demand will not trigger a price hike attributable to an increase in the unit cost of production. The latter policy should stimulate trade flows in the region through the provision of additional infrastructure, as the current foundation is insufficient.