South Korea's Democracy Challenge, Indonesia's Rp401.8 Trillion Deficit, FOMC Cuts Rates, Honda and Nissan Partnership, Government's 12% VAT Plan.
By Fayza Nawra Avanitanya, Muthia Noor Safitri, Kenzie Aryasatya, Imam Fakhri Prayogo Harianto
January 3, 2025 at 16:30 GMT+7
South Korea President, Yook Suk Yeol | Source: Reuters
South Korean President Yoon Suk Yeol declared martial law, citing threats from “anti-state forces,” prompting military intervention in the National Assembly. The move sparked widespread protests, with parliament swiftly nullifying the declaration as unconstitutional. Facing plummeting approval ratings, scandals, and opposition dominance in parliament, Yoon is accused of using martial law as a political gamble. His decision has intensified calls for impeachment, with a vote expected soon.
Critics argue that the crisis has damaged South Korea’s democratic reputation, underscoring challenges to its governance and highlighting tensions between Yoon’s administration and the opposition-controlled legislature.
Menteri Keuangan, Sri Mulyani di Istana Negara | Source: Kompas / Fika Nurul Ulya
Indonesia recorded a Rp401.8 trillion fiscal deficit (1.81% of GDP) as of November 2024, indicating a revenue-expenditure gap amid efforts to stimulate growth and support public welfare. Revenues reached 89% of the annual target, while expenditures hit 87%, driven by a 15.3% YoY surge in spending on social programs and transfers.
Despite modest revenue growth of 1.3%, the deficit remains within the Rp522.8 trillion cap, showcasing disciplined fiscal management. Finance Minister Sri Mulyani emphasized the government’s focus on balancing economic resilience and growth amid global uncertainties, prioritizing sustainability without exceeding the budgeted deficit threshold.
Federal Reserve Bank Chair Jerome Powell | Source: Kevin Dietsch / Getty Images
The Federal Reserve cut interest rates to 4.25%-4.5%, marking its third consecutive reduction as it navigates economic risks. Chair Jerome Powell signaled a cautious approach, with future rate cuts expected to slow. Despite resilient job creation, inflation pressures persist, complicating efforts to stabilize prices.
Markets reacted negatively, with the Dow, S&P 500, and Nasdaq dropping 1.2%, 1.4%, and 1.8%, respectively. Critics warn of inflation risks from easing monetary policy, while advocates emphasize the need to sustain growth. This move contrasts with the stricter inflation-focused approach of the Bank of England, underscoring divergent strategies for managing complex economic challenges.
CEO of Nissan, Makoto Uchida, and CEO of Honda, Toshihiro Mibe | Source: Honda
Honda and Nissan have announced a merger to form the world’s third-largest automotive group by 2026. The partnership, formalized in August 2024, will establish a joint holding company in Tokyo. The merger aims to combine resources, boost competitiveness in electric and autonomous vehicle production, and expand into two-wheel vehicles.
Financial struggles and competition from Chinese automakers drive the collaboration. Combined revenue is projected to exceed ¥30 trillion, with an operating profit of over ¥3 trillion. Final decisions are expected by June 2025, with the holding company set to be listed in August 2026.
President Prabowo at Ministry of Finance | Source: BPMI Setpres/ Muchlis Jr
Government’s 12% VAT Plan: Purpose, Policy, and Expectations
Indonesia's revised 12% VAT policy, effective January 1, 2025, targets luxury items like private jets, yachts, and properties over Rp30 billion, while essentials such as food, education, and healthcare remain exempt with a 0% rate. The policy aims to boost state revenue, promote fairness, and avoid double taxation.
To support vulnerable groups, the government plans stimulus packages, including tax cuts for small businesses, to drive economic growth amid global challenges. By focusing on high-value transactions, the policy seeks to balance social equity with fiscal responsibility, ensuring economic resilience and public welfare.
Sources:
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