Acknowledging that certain reforms were unexpectedly swift, including decisive strides to curtail energy expenses, succor farmers, promote tourism, and harness the power of soft diplomacy, Prommin Lertsuriyadej avowed that the Thai government had an array of policies planned for rolling out in the subsequent months. He also recognized a momentous economic toll exacted on the Thai economy due to the Covid-19 pandemic, indicating a contraction of GDP by 7% due to the impact. The rebound, he noted, was laboriously sluggish, which raised eyebrows over the state of economic recovery.
Another indicator that underscores the ticking economic time bomb is the debt-to-GDP ratio that burgeoned from 70% in 2012 to a staggering 90% today, putting Thailand’s economy in a tight spot. An eroding inflation, dwindling from 5.02% in January to a meager 0.30% in September, painted a dire picture of the hard-pressed Thai population’s purchasing power. The situation has been exasperated by the government’s monetary policy which, in an effort to mitigate the economic slackening, escalated interest rates up by 1.25%, hitting a high note of 2.50%. A demeanor which reflects the government’s laser-focused intent to uncover escape hatches for the overburdened people and to improve their conditions.
Cutting back on spending came up high on the list of the initial governmental plans. The energy sector took the brunt of the hit, with a drop in electricity tariffs to 3.99 baht per unit in the latest billing cycle. Following which, the government made headway with its “agricultural debt moratorium” policy from October 1, offering financial aid to those bogged down by debt.
“Think of it as a rescue operation for someone on the brink of drowning. The government’s role is to keep them afloat until they can muster enough strength to swim to the shore,” illustrated Prommin.
On its agenda next, the government has the ‘income generation’ policy with tourism as the poster child. This includes policies such as fee-free visas for Chinese and Kazakh visitors to Thailand and rectification of issues, such as traffic congestion, which act as deterrents to tourism. Also high on the priority list is opening up opportunities, which involve participation in international forums like the 78th United Nations General Assembly in New York City, to draw investments into Thailand, particularly in energy and infrastructure sectors.
Acting as a major investment magnet has been Amazon Web Services, a subsidiary of Amazon, which has proposed cloud infrastructure investment plans in Thailand, projecting over US$5 billion (or 1.9 trillion baht) over the forthcoming 15 years. That said, there do exist hurdles in attracting foreign investments that need to be speedily addressed. One such move was the recent formation of a committee, chaired by Professor Tongthong Chandransu, tasked with simplification of investment hurdles and crafting an easy business ecosystem, dubbed as the ‘Ease of Doing Business’ committee.
The strategy to shine a spotlight on Thailand’s soft power by levitating the concept of One Tambon One Product (OTOP) is yet another noteworthy initiative. At a recent meeting led by the Prime Minister, a novel approach to capitalizing on the untapped potential of Thai products was discussed, with the aim of converting these products into streams of income.
The government’s path-breaking move to create opportunities through “digital wallets” – endowing each individual older than 16 years with 10,000 baht – is a stark deviation from traditional monetary management. The new policy buoying digital cash infusion worth over 5.6 trillion baht into the economy does so without destabilizing the fiscal discipline, as per Prommin. This policy would have no bearing on the country’s credit rating as confirmed at the high-level committee meeting chaired by the premier. Nevertheless, concerns remained over the purpose and repayment of this money, issues which are being addressed according to Prommin.
“Assuming efficient execution, concerns should take a backseat,” explained Prommin, underscoring the benefits of stimulating economic activity via the digital money injection policy. An enhanced consumer spending leads to factories ramping up production, which in turn leads to job creation and in due course, upscaled tax collections.
Currently, the government is exploring several avenues of funding the digital wallet policy. These could include tweaking the annual budget, tapping into funds under Article 28 of the Financial Discipline and Treasury Act, or as a last resort, borrowing. The committee, chaired by Deputy Finance Minister Julapun Amornvivat, is entrusted with the task of reviewing these options.
Utilizing the annual budget would necessitate diverting funds earmarked for non-essential projects. For instance, postponing unimportant large-scale procurement contracts is an option. Alternatively, the mechanism under Article 28 could be leveraged, allowing state’s specialized financial institutions to disburse funds in advance with budget allocations made for future compensations. Although this approach might stretch fiscal limits, the government has a well-defined plan for reimbursement. As detailed by Prommin, if the expenses don’t exceed 200-300 billion baht, approximately 100 billion baht will be set aside for annual compensation, thus ensuring not more than a three-year repayment period.
The last option on the table is direct borrowing without affecting the public debt-to-GDP ratio. In the coming years, with the substantial expansion of public debt, the government will be afforded additional flexibility. However, the committee is tasked with deciding on the most suitable course of action, which could potentially be a blend of multiple options, Prommin added.
He went on to state that successful execution of these plans would require diligent monitoring to promptly identify and rectify any hiccups. “Each policy implementation, current and future, will need a close eye to ensure it delivers the desired result or to nip any emerging issues at the bud,” concluded Prommin.