Green Fiscal Stimulus in Indonesia and Vietnam: A Reality Check of Two Emerging Economies

ABSTRACT

The COVID-19 pandemic has caused economic and social upheaval across countries. The global economy suffered its biggest slump in four decades while the decades of progress in poverty reduction are now in reverse. However, the pandemic presents a window of opportunity for a greener world. In contrast to fossil fuel, renewable energy showed resilience throughout the pandemic, where the demand and investment in this sector continued to increase. The opportunity for a post-COVID-19 green recovery also comes from billions of government fiscal measures in response to COVID-19. Using the case of two emerging economies, Indonesia and Vietnam, this paper investigates whether the stimulus plans align with a country's sustainable energy and climate targets. This study finds that despite ambitious country targets for green energy transition, these countries may miss opportunities for a green future due to limited fiscal measures directed to green recovery. The pandemic has exacerbated public fiscal budgets that may further limit the capacity to fund green projects. Amidst the uncertainty and challenges brought by the pandemic, it is critical to balance between promoting economic recovery and achieving sustainable energy and climate targets. To this end, the authors suggest several policy recommendations to achieve these targets amid uncertainty brought by the COVID-19 pandemic for emerging economies. © 2023 by the authors.