ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter

Asia turns on the fiscal taps to cushion coronavirus impact

As crisis drags on, governments face pressure to offer even more aid

Pedestrians in Seoul: Governments across Asia are scrambling to mitigate the economic impact of the coronavirus pandemic.   © Reuters

TOKYO/BANGKOK/NEW DELHI -- Cities across Asia and the world are under lockdowns and other restrictions to stem the spread of the new coronavirus. The longer the pandemic drags on, the worse the economic damage will be.

Central banks have already cut interest rates and, in some cases, expanded quantitative easing. But it is increasingly apparent that monetary policy alone will not be enough to cushion the shock for businesses and citizens.

This puts the ball in governments' court. From loan guarantees to tax relief and straight-up cash handouts, Asian countries are rushing to introduce fiscal relief measures. But as the human and economic costs mount, even more drastic steps may be required.

Here's how governments are responding so far.


Prime Minister Shinzo Abe's government is compiling an economic stimulus package for introduction in April. Expected measures include cash handouts and discounts on travel and dining out. The most dramatic move under consideration would be a sales tax cut -- after the levy was just raised from 8% to 10% in October. But Fumio Kishida, the policy chief of Abe's Liberal Democratic Party, said on Sunday that scheduling a tax reduction could have a negative impact if it means consumers wait to buy products.

The government has already decided on some emergency steps, such as support for working parents to offset lost income due to school closures, and interest-free loans for small and midsize enterprises.

Though the new stimulus package could be even larger than those introduced after the financial crisis in 2009, some experts question the effectiveness of cash handouts. At a time when people are reluctant to go out and spend, they warn most of the money would be stashed as savings.

-- Katsuhiko Hara

A passenger browses a store in a nearly deserted Kansai International Airport in Osaka on March 14.    © Reuters

South Korea

The Finance Ministry announced on Friday that it will lend 12 trillion won ($9.39 billion) to the owners of small shops through banks with an interest rate of 1.5%.

Also last week, the National Assembly passed an extra budget worth 11.7 trillion won. This includes 300 billion won worth of loans to budget airlines and 100,000 won in monthly subsidies for children under the age of 7, available for four months.

The central government has yet to decide on direct cash handouts, but some municipal governments are also offering subsidies for residents in need. Seoul Mayor Park Won-soon said last week that the capital will pay up to 500,000 won to 1.2 million households with incomes below the median.

Many feel the central government's plans are insufficient. In a recent survey by the Korea Economic Daily, 56% of respondents said they want the government to pay "disaster basic income," versus the 42% who opposed such a policy.

-- Kim Jaewon


Chinese authorities have offered tax deductions, extended loan repayment deadlines and also provided subsidies to affected enterprises since the outbreak forced companies nationwide to suspend operations in late January.

The central bank in recent months has also cut its medium-term lending facility rate and lowered commercial lenders' reserve ratio, aiming to reduce the cost of funding and encourage domestic banks to support cash-strapped businesses. However, "it is still too early to tell whether the monetary policy will create a sufficiently lax liquidity environment," analysts at Natixis Asia Research wrote in a research note last Thursday.

With the coronavirus spreading across Europe and North America, the analysts also warned that current efforts may not be sufficient to absorb the impact.

"The pandemic will push China for more stimulus but China will still fall short of a full 'V-shape' recovery," they wrote, citing disrupted global supply chains and prolonged restrictions on large gatherings.

-- Coco Liu


Taiwan has earmarked 100 billion New Taiwan dollars ($3.31 billion) to help suffering industries, President Tsai-Ing-wen said on Thursday. This starts with a NT$60 billion package approved by the Legislative Yuan to secure enough medical supplies and support the travel, retail, aviation and manufacturing sectors, with an additional NT$40 billion available if needed.

"We would not rule out expanding the stimulus package if necessary to stabilize all the industries," the president said.

As of March 16, nearly 110 companies had forced employees to take unpaid leave, affecting almost 4,000 people. Most are small companies with fewer than 50 workers, according to the Ministry of Labor.

China Airlines and Eva Air, Taiwan's two major carriers, are encouraging employees to take unpaid time off as well. Around 1,000 China Airlines managers have already agreed to 10% pay cuts for three months.

The board of Lion Travel, Taiwan's largest travel agency, on Friday approved a resolution that all board members including the chairman would decline their remuneration for 2019. Executives have agreed to 50% pay cuts, and managers have accepted 30% reductions, to help weather the crisis.

Similarly, at Formosa International Hotels, Taiwan's biggest hotel group and the operator of the Regent Taipei, board members gave up their 2019 compensation while high-ranking managers agreed to 30% pay cuts.

-- Lauly Li and Cheng Ting-Fang

Hong Kong

The Hong Kong government has rolled out a series of relief measures valued at 120 billion Hong Kong dollars ($15.4 billion). They include a one-off cash handout of HK$10,000 to all permanent residents 18 years old and above, business subsidies and tax cuts.

Retailers, restaurants and travel agencies -- among the business hit hardest by the slump in tourism and the economic downturn, are eligible for one-time subsidies of HK$80,000 to HK$200,000. The government is also offering a full guarantee on loans for companies to pay wages and taxes.

The hefty handouts are controversial, however. The government has been dogged by historically low approval ratings, over its inability to resolve the pro-democracy protests that raged for months before the outbreak. Experts believe the fiscal support is aimed at placating the public in the short term without addressing core problems like housing shortages and a widening wealth gap.

A grueling application process is another concern: It took over a year for citizens to receive their payments the last time the government handed out cash, in 2018.

Terence Hon, who runs a chain of three GreenPrice grocery stores in the city, stands to receive HK$240,000 -- HK$80,000 for each shop. "It is better than nothing, although most of the money will go to the landlord eventually," he said, adding that this will not be enough to withstand a prolonged crisis.

-- Michelle Chan


Malaysia has introduced a $4.8 billion economic stimulus plan. State enterprises are also being urged to invest more in the country -- with energy company Tenaga Nasional, for example, set to invest 13 billion ringgit ($2.92 billion) throughout this year.

Bidding for up to 1,400 megawatts of solar power projects is also expected to generate 5 billion ringgit of private investment and create 25,000 jobs.

Meanwhile, the government has suspended monthly income tax installment payments for tourism businesses. Hotels, travel agencies, airlines, shopping malls, and convention and exhibition centers are eligible for 15% discounts on their monthly electricity bills.

In addition, all Malaysian households and other commercial users are being granted 2% electricity rebates for six months.

Each taxpayer will be given up to 1,000 ringgit in income tax breaks for money spent on domestic tourism, and each Malaysian will receive 100 ringgit in digital vouchers for trips within the country. The government has also instructed all banking institutions to reschedule or postpone loan repayment for borrowers who are directly affected by the outbreak.

-- P Prem Kumar


The city-state has earmarked 5.6 billion Singapore dollars ($4 billion) for its relief measures.

All taxpaying companies have been granted a rebate this year equivalent to 25% of corporate tax payable, capped at SG$15,000. This will cost the government SG$400 million.

Tourism, aviation, retail, food services and point-to-point transport services are getting additional support. Hotels and meeting venues will be eligible for a property tax rebate of 30% this year.

In addition, in an effort to save jobs, the government will help companies defray costs by offsetting 8% of wages for every local employee, capped at SG$3,600 a month for three months. With over 1.9 million local employees in Singapore, this will set the government back SG$1.3 billion.

Businesses have welcomed the relief measures, but they remain concerned about staying afloat for the long haul.

The government says a second package of support for companies and workers is in the works, but has yet to reveal the full details. Officials have signaled that it will target small and midsize enterprises, the self-employed and retrenched workers.

-- Dylan Loh


The Thai government has ordered the three state-run electric utilities to return home meter deposits, to ease the financial pressure on households.

By law, all power customers are required to pay these deposits when they register. Depending on capacity, the money coming back ranges from 300 baht to 6,000 baht ($9.20 to $182.15). The government will wind up allocating around 40 billion baht for this.

Many feel this measure is more acceptable than simply handing out "helicopter money," which the government considered earlier in the crisis.

Some businesses, meanwhile, are asking for more assistance despite some help from the state and a debt moratorium offered by banks. Tourism-related companies are among the hardest hit. Once it ensure the outbreak is under control, the government is expected to come up with additional rescue measures.

-- Apornrath Phoonphongphiphat


On March 6, Hanoi allocated as much as 280 trillion dong ($12 billion) in aid for industries such as aviation, tourism, hotels and other services.

The Ministry of Finance is working on fiscal measures to allow affected enterprises to delay value-added tax and land lease payments due in the coming months, for up to five months.

To shore up the stock market, the ministry also ordered cuts to fees charged by exchanges and the Vietnam Securities Depository -- a 10% reduction on trading or depository functions, a 15-20% cut on derivatives trading, and a 30% to 50% discount on issuer fees.

But many smaller businesses feel a sense of hopelessness. They say the aid is mainly designed for big corporations and state-owned entities, and fear they will be bankrupt by the time help arrives.

And while other countries are handing out money, Vietnamese Prime Minister Nguyen Xuan Phuc's government last Tuesday called on the public and companies to donate funds and medical supplies to support the state through the crisis.

The feet of a taxi driver sleeping in Manila are pictured after hundreds of cabs were flagged down by the Philippine authorities.    © Reuters

The Philippines

President Rodrigo Duterte has asked congress -- currently in recess and restricted by an expanded lockdown -- to convene and pass a bill declaring a national emergency and allow him to access unspent funds and reallocate budget to fight COVID-19, among other provisions.

Luzon Island, home to 57 million people and accounting for around 75% of the economy, is under a monthlong lockdown until April 12. So last week, the Finance Department announced a 27.1 billion peso ($530 million) package to soften the economic blow.

Around half, or 14 billion pesos, will go to the badly hit tourism sector. The rest will go toward efforts to prevent the spread of the virus, subsidies for people who have lost income, and support for farmers.

"As directed by President Duterte, the government will provide targeted and direct programs to guarantee that benefits will go to our workers and other affected sectors," Finance Secretary Carlos Dominguez said. "We have enough but limited resources, so our job is to make sure that we have sufficient funds for programs mitigating the adverse effects of COVID-19 on our economy."

Philippine business groups, meanwhile, are calling for a "maximum fiscal response" to the tune of a 281 billion pesos stimulus program.

The Philippines has also secured a $100 million loan from the World Bank to buy protective gear for health workers. Another $1 billion loan is under consideration, local media reported, citing Dominguez.

In addition, after some initial hesitation, the government has pushed back the deadline for filing income tax returns by a month, to May 15.

-- Cliff Venzon


The government has announced 158 trillion rupiah ($9.9 billion) worth of stimulus policies, including a relaxation of income tax for employees and companies, mainly in the manufacturing and processing industries. Jakarta has also eased some of its import and export requirements.

Most of these measures are due to take effect in April.

The Financial Services Authority is relaxing its policies on bad loans and debt restructuring for both corporations as well as micro, small and midsize businesses -- including vehicle loans for motorbike taxi drivers. The government is also looking at expanding social safety nets, such as direct cash aid and food stamps.

These steps follow last month's announcement of incentives for the airline and tourism sectors. The idea was to help them offer discounts and attract more travelers, domestic and international alike. But after virus cases rose in Indonesia and countries strengthened travel restrictions, the policy became useless.

"That is an action plan for a recovery phase. But what we're experiencing now is a crisis. It's a waste to implement that policy now, so it's postponed," Agung Rai Suryawijaya, deputy chairman of the Bali chapter of the Indonesian Hotel and Restaurant Association, told Nikkei on Friday.

He added that occupancy rates at Bali hotels have dropped to as low as 7% to 9%, from an average of 65% in March in previous years. Many establishments have been forced to put employees on unpaid leave, and a drawn-out crisis raises the likelihood of sweeping layoffs.

The Bali administration, Suryawijaya said, will remove a 10% hotel and restaurant tax starting this month, among a few other incentives. Nevertheless, the industry is facing "tremendously extraordinary" potential losses.

-- Erwida Maulia

Residents clap and bang utensils to cheer on emergency personnel and sanitation workers on the front lines of the battle against the coronavirus in Mumbai.   © Reuters


India has yet to announce any relief packages, though Prime Minister Narendra Modi said in a televised address on Thursday that the government will form an Economic Response Task Force headed by Finance Minister Nirmala Sitharaman.

"We think [the government] will need to unveil cash handouts for households, as well as targeted measures to support the industries most affected by the outbreak," macroeconomic research firm Capital Economics said in a note on Friday, alluding to rumors of an aviation bailout. "This scale of policy response won't stave off a continued downturn in the next few quarters, but it might aid a stronger recovery once the crisis is over."

Finance Minister Sitharaman on Friday told reporters that the government aims to announce a relief package for distressed sectors as soon as possible, but did not say when.

Meanwhile, the country's southern state of Kerala recently announced a 200 billion rupee ($2.6 billion) special package involving health care, loan assistance, welfare pensions, rural jobs, free food grains, subsidized meals and tax relief for residents.

-- Kiran Sharma

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more