The Congressional Budget Office doesn’t see Washington go on a diet. Instead, it forecasts the fiscal deficit to average at 6.1 per cent of gross domestic product over the next decade. Already, the government spends 14 per cent of its tax revenue on net interest payments, the highest level since 1998.
“Long-term investors should no longer own Treasury bonds,” noted Jefferies’ equity strategist Christopher Wood.
INDONESIA MAINTAINS FISCAL DISCIPLINE
In this global context, buying US$350,000 worth of local government bonds looks like a safer bet. Indonesia still maintains fiscal discipline, perhaps in no small part because of the capital outflows it suffered during the Global Financial Crisis.
These days, Jakarta adheres to a 3 per cent self-imposed limit on its fiscal deficit, even at the expense of slower growth. The latest projection for 2024 is 2.29 per cent of GDP.
This conservative attitude is a refreshing narrative in a world awash with leverage. From China to the European Union and the US, investors worry how much debt is too much, and when a full-blown financial meltdown will arrive.
In Indonesia, on the other hand, household debt accounts for only 9 per cent of GDP – in fact, less than 60 per cent of its young population of 274 million have a bank account.
This balance-sheet landscape presents a great opportunity for tech entrepreneurs who want to be more than passive investors and dabble in fintech and financial inclusion. Mobile devices are ubiquitous – people would rather own a smartphone than a television or a washing machine.
Meanwhile, social media platforms, such as TikTok, are influential channels for Gen Z. Indonesians are connected, but also insulated from the chaotic debt-fuelled world.
And let’s not forget Bali, the sub-tropical surfing and yoga haven. Last summer, when I was doing a meditation retreat there, I saw young digital nomads typing furiously on their laptops in trendy cafes, while fuelling up on kombucha.
I was envious. I wish I could move there. Indonesia’s golden visa sure deserves a good look.
