Paper short abstract:

Household debt ballooned across Southeast Asia during COVID-19 as many fell through the cracks of safety nets. Based on region-wide surveys, this paper argues that existing recovery strategies - especially financial deregulation - run the risk of economic & political volatility in the years ahead.

Paper long abstract:

In the wake of the pandemic governments across the globe have accrued significant public debt to provide stimulus and bailouts to companies and households. Yet in contexts like Southeast Asia where the informal sector remains more than half of the economy these support packages have often failed to reach the poorest households. This paper examines how the cracks and gaps in social safety nets in Southeast Asia have led to compounding household survival debt throughout the pandemic. Drawing on surveys from Myanmar, Malaysia, Thailand and Indonesia it argues that the failure of government social protection to expand sufficiently in the wake of the pandemic, compounded by pre-existing informal welfare provision and taxation, has created household debt that will suppress economic recovery and compound socio-political instability in the years ahead. In particular, it finds that respondents indebted during COVID-19 are far more supportive of economic protection and progressive social policy and taxation reform measures than more affluent voters. The paper concludes that attempts to provide a COVID-19 ‘economic boost’ without systematically reducing the source of household debt, for example via financial deregulation and trade agreements such as the Regional Comprehensive Economic Partnership (RCEP), are likely to be both economically ineffective but also politically unpopular as they further exacerbate precarity and inequality. A new deal which forgives survival debt, improves safety nets and commits to fair government revenue generation is critical if a more robust region is to emerge from the pandemic.