Thailand's economy: Where is it going?

Growth up a little but average household suffering economically. Political stability & renewed investment key to future growth & prosperity.

ECONOMY

Thailand's economy: Where is it going?

22/09/2016
Wichit Chantanusornsiri

The Prayut Chan-o-cha government has been leading the country for more than two years now.

The government has managed to lift the country out of the economic stagnationthat existed before the 2014 coup, but it has failed to accelerate growth.

SLOW ECONOMIC GROWTH

Many people blame the weak global economy for sluggish Thai economic growth.

In 2014, economic expansion stood at only 0.8%.

One year after the Prayut government took control, growth remained low at 2.8%.

This year it is predicted to be around 3%.

Thailand's export sector, the key driver of the economy, has suffered in the recent global economic downturn and is predicted to contract 1.9% this year.

IMPACT OF SLOW ECONOMY ON HOUSEHOLDS 

The positive effects of the economic rebound have not been felt by most people.

For now, people with low and medium incomes continue to bear the brunt of the sluggish economy.

They have less money to spend and household debts have grown larger.

Several key industries such as automobiles, advertising, print and broadcast media have continued to shut parts of their operations and lay off employees, mainly through early retirement programmes.

Unemployment has been the outcome for many.

The average Thai today still suffers economically.

Even though the inflation rate stands at a fairly low rate, the cost of living remains high, as do bank loan interest rates.

ECONOMIC STABILITY NEEDED FOUNDATION FOR INVESTMENT 

In the current gloomy political climate, the government is facing a test of whether it can accelerate investments and avoid a period of renewed political instability.

The much-needed economic rebound will likely depend on domestic political stability, which is needed to shore up investor sentiment and provide a foundation for public and private investment.

Politics, however, is in a state of flux. As a key determinant of the country's economic growth, it is still unclear what a new democracy under the new charter will look like.

The next election is drawing closer, and with it the prospect of political turbulence as a result of the regime's move to seek compensation from previous state officials, the companies and politicians involved in the loss - ridden rice-pledging scheme run by the Yingluck Shinawatra government.

ECONOMIC STIMULUS TO ACCELERATE GROWTH

Meanwhile, the government has launched economic stimulus measures to accelerate growth.

These stimulus measures include 60 billion baht allocated for village funds nationwide, the tambon development project where each district gets five million baht to invest, a handout project that will give extra cash to farmers.

Moreover, the Prayut administration has come up with tax incentives to spur domestic private investment. For example, it has doubled the amount of investment eligible for this year's tax exemption.

These measures have been implemented at a fast pace to shore up domestic investment and stave off a future economic recession.

The government's large financial injection has helped restore domestic spending which can be seen in an increase in government revenue from the value-added tax (VAT).

PRIVATE INVESTMENT LAGGING PUBLIC INVESTMENT

However, much still needs to be done to shore up domestic private investment.

The NESDB last month predicted private investment will expand by just 1.5% while public investment will increase by 10%.

Private investment remains a key factor in bringing about an economic recovery.

INVESTMENT PLANS

If the government can pursue its own 20 investment plans, amounting to a total cost of 1.41 trillion baht, several megaprojects are likely to get the go-ahead next year.

These include elevated rail projects in Bangkok and several dual - track rail projects.

The state's megaprojects will draw interest from the private sector.

The real-estate sector, for example, can capitalise on the prospect of home buyers looking to buy properties along the new train line routes.

A failure by the government to push these projects forward will disappoint both voters and investors who have waited for them to get the go-ahead (for example, the long-delayed Thai-Chinese train project here).

Many previous governments had similar megaprojects in the pipeline but faced a delay in execution.

http://www.bangkokpost.com/opinion/opinion/1091909/jury-still-out-on-governments-ability-to-lift-economy

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