Analysts at ANZ suggest that with the shape of the upcoming business cycle unclear and monetary easing reaching its limits, Asian policymakers are turning to fiscal policy to bolster growth.
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“But how much can expansionary fiscal policies deliver? Not a whole lot by our estimates. Though the region is fiscally fit, the effectiveness of fiscal policy is muted by various issues such has openness to trade and low tax-GDP ratios. Much depends on the size of the fiscal stimulus.”
“Based on the latest available fiscal data, we believe fiscal policy will provide the largest boost to growth in South Korea. At the other end of the spectrum is Indonesia.”
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