Policymakers across the world have deployed unprecedented policy measures to mitigate the economic impact of the COVID-19 pandemic. The extraordinarily-large economic stimulus packages could significantly narrow policy space. This study aims to provide a framework for analyzing available fiscal and monetary policy space in the ASEAN+3 region based on a combination of quantitative and qualitative indicators, incorporating country-specific features.

The fiscal space framework incorporates assessments in three areas: i) debt sustainability; ii) risk to financing capacity and debt profile; and iii) country-specific factors. Monetary policy space for conventional monetary policy measures is assessed based on comparison across economies, taking into account: i) the degree of monetary policy autonomy; ii) the level of interest rates; iii) external vulnerability; and iv) financial imbalances and the ability to address them. In addition to the analytical framework, the study also highlights the importance of careful strategies for an exit from policy support.

Authors: Chaipat Poonpatpibul, Jinho Choi, Justin Lim, Laura Grace Gabriella, Seung Hyun (Luke) Hong, Simon Liu, Wanwisa May Vorranikulkij, Zhiwen Jiao