Amid glum outlook, experts warn stimulus packages not a panacea for economic ills

By WICHIT CHAITRONG 
THE NATION

 

 File photo: Apisak Tantivorawong

 

THE BLEAK economic outlook under the shadow of political uncertainty as well as the global economic slowdown has impacted Thai exports and the latest government stimulus is not likely to help much, say experts.

 

The government is expected to present to the Cabinet tomorrow a Bt20-billion economic stimulus package. Finance Minister Apisak Tantivorawong had said earlier that the fresh cash injection was necessary to shore up the economy during the period of political transition before the new government takes office. 

 

The Election Commission (EC) has promised to announce the outcome of election in May but legal hurdles and doubts over the EC’s integrity have raised questions about the legitimacy of the next government. 

 

“Bad political institutions or bad rules of the game would constrain economic potential. The outlook is bleak,” said Pairoj Vongvipanond, a former dean of Chulalongkorn University’s Faculty of Economics.

 

The Thai economy is already faced with structural issues such as an ageing society, which means fewer people are entering the workforce, according to Pairoj. 

 

Many institutions such as taxation need to be reformed, but the junta-backed government failed to do so during its five-year rule following the 2014 coup, he said. 

 

Some political parties contesting the general election have proposed reforms to bureaucratic institutions, the Army in particular, but they are strongly opposed by the Army, he said. 

 

Thailand also suffers from a huge income gap between the rich and poor, yet the current government only pays the issue lip service, Pairoj said. Business oligarchs and those who have vested interests in the status quo have opposed reform efforts, he said. 

 

Meanwhile implementation of the Eastern Economic Corridor (EEC) project remains to be seen, he added. 

 

“A series of government stimulus packages, including the latest one to be presented tomorrow to boost consumption, are of little assistance in fundamentally helping the economy improve,” he said. 

 

The Finance Ministry will make public the latest economic data from March tomorrow. Initial indicators suggest that economic growth would be slower than 3 per cent in the first quarter of this year, according to officials at the ministry. Thailand’s exports contracted 1.6 per cent in the first quarter amid a global trade slowdown. 

 

“The ministry is not targeting a specific growth rate with the latest measures – we just want to shore up the economy and prevent it from sliding further,” said Lavaron Sangsnit, director-general of the Fiscal Policy Office. 

 

The Bank of Thailand (BOT) and World Bank also voiced concerns over the delay in forming a new government, which they worry could hurt confidence in investment and consumption. Investors and consumers are expected to delay spending decisions as they wait for a clear picture of the political landscape. 

 

“Assuming a new government takes office in June, the BOT has forecast GDP growth at 3.8 per cent for 2019, but if the government formation drags into September, then it would further dampen economic prospects,” said Don Nakornthab, senior director of the Bank of Thailand’s Economic and Policy Department. 

 

Somjai Phagaphasvivat, a political scientist, argued that political factors had a limited impact on the Thai economy. “The biggest impact comes from the global economic slowdown,” he said. 

 

He did not expect political rivals to compromise. “It’s a zero-sum game. But if it could be resolved, it would have been done over the past four or five years,” he said. 

 

He added, however, that whichever political bloc formed the new government, it was likely to continue implementing 80-90 per cent of infrastructure projects and projects related to the EEC initiated by the current government.

 

Source:  http://www.nationmultimedia.com/detail/business/30368504

 

-- © Copyright The Nation 2019-04-29

2 hours ago, webfact said:

legal hurdles and doubts over the EC’s integrity have raised questions about the legitimacy of the next government. 

thailand is only ready for 'thai democracy', the rest of the world calls that 'authoritarianism'

2 hours ago, webfact said:

raised questions about the legitimacy of the next government. 

there are questions raised about the legitimacy of this government too.

Edited April 28, 20197 yr by mikebell
missing word,

Wait till interest rates rise. Then watch the foreclosures. Thais think “ land only go up”. While the world braces for the next crash, these folks are building and buying ....on borrowed money without reading any fine print

Besides tourism what are Thailand's economic drivers? 

 

9 minutes ago, Oziex1 said:

Besides tourism what are Thailand's economic drivers? 

 

The continuing 5% monthly rise in tourists, no, wait a minute, I'll get back to you on that.

Besides tourism what are Thailand's economic drivers? 
 

I think the exporting of rice and cement are positive factors in the Thai economy

Sent from my SM-G7102 using Thailand Forum - Thaivisa mobile app

6 hours ago, webfact said:

Amid glum outlook, experts warn stimulus packages not a panacea for economic ills

 

The junta does not need decadent, foreign tricks such as stimulus packages. Supreme Leader only needs to wave his magic twanger...and all will be well.

 

 

Would not pay much attention to

this expert , as another expert within 24-72 hours will state that Thai economy is in excellent strong shape with high growth predictions.

 

then local Thai visa experts will also tell us how millions of Chinese spending  millions of dollars.

 

so carry on as usual ????

What would improve the economic situation is for the RTA volunteer to reduce the defense budget, mass resignation of those armchair generals and Prayut step down and announced that the constitution will be change to a semblance of the '97 constitution. The EC will followed and resign enmassed and allow the winner of the election to be the party who won the most seats. Still 1st April right?

6 hours ago, webfact said:

".......experts warn stimulus packages not a panacea for economic ills"

Surely not? Stimulus packages seemed to be the order of the day when the PM and his Cabinet were roaming the country with their Thai Niyom cash splash (47 billion baht) buying the populist vote and the loyalty and support of provincial and village officials (200,000 baht for every village). 

I'm fine with them screwing it all up, get on with it please as the baht might then start to hit more realistic ground and it also makes the junta look incompetent plus may hasten their demise. 

 

On a slightly more serious note, how do they expect to boost consumption when people are debt ridden, being squeezed and earning so little? You can't just expect people to spend their way out of stagnation so you can keep on hitting new growth figures all the time ... the boom days are gone for now and it's more like we are going through the hangover after the party last night.

Edited April 29, 20197 yr by Sir Dude

1 hour ago, Oziex1 said:

Besides tourism what are Thailand's economic drivers? 

 

Manufacturing is much bigger. Things like machinery, autos and electronics. Agriculture is very significant also. 

 

If these clowns cared and had a clue they would drastically reduce foreign reserves so the baht's strength would be diminished.

28 minutes ago, pegman said:

Manufacturing is much bigger. Things like machinery, autos and electronics. Agriculture is very significant also. 

 

If these clowns cared and had a clue they would drastically reduce foreign reserves so the baht's strength would be diminished.

Yes, I might spend a little more time in the country, but it is getting to be poor value.

44 minutes ago, pegman said:

Manufacturing is much bigger. Things like machinery, autos and electronics. Agriculture is very significant also. 

I just looked this up out of interest, couple of surprises in the list:-

 

Machinery including computers: US$42.9 billion (17.2% of total exports)

Electrical machinery, equipment: $35 billion (14%)

Vehicles: $30.4 billion (12.2%)

Rubber, rubber articles: $15.5 billion (6.2%)

Plastics, plastic articles: $14.5 billion (5.8%)

Gems, precious metals: $11.9 billion (4.8%)

Mineral fuels including oil: $10.6 billion (4.2%)

Meat/seafood preparations: $6.6 billion (2.6%)

Organic chemicals: $6.1 billion (2.5%)

Cereals: $5.7 billion (2.3%)

 

Those numbers are believable, when you look for income from tourism you have a huge choice of "facts" 

In 2016 the income from tourism "was" $71.4 billion - maybe...................

these programs are not meant, at all, to be good economics.  it's about politics, and so is this "news" stuff.   that's even more especially so when it is, maybe not this time but most times, when it's a "university" lecturer expounding on something.  blah blah blah.  politics.

Edited April 29, 20197 yr by WeekendRaider

9 hours ago, webfact said:

fresh cash injection was necessary to shore up the economy

....so just to boost the wealth of the wealthy..... 

 

8 hours ago, webfact said:

experts warn stimulus packages not a panacea for economic ills

Given (at face value) Thailand's extremely low unemployment rate, lack of skilled workforce, low inflation rate, high consumer confidence, high value baht, strong stock market and moderate GDP growth rate, economic stimulus packages in the form of tax relief to attract foreign and domestic investment¹, increased government infrastructure spending and farm subsidies, and public "gifts" would seem counter-productive by further "heating" the economy as a whole.

 

Furthermore, the nation's economic sectors are not geographically monolithic. That means the application of economic policies must be applied with geometric precision based on the specific needs of people in their locality.²  The long-term danger of the government's current fiscal stimulus is loss of confidence in government debt and sharply higher public and private borrowing costs. Already China does not view the Thai government as highly creditworthy as evidenced by its relatively high interest rate being charge for its Thai infrastructure loans.

 

What is needed are more structured and directed economic policies that reduce the long-term government and consumer household debt. While that may dampen GDP growth in the short term (perhaps unpopular with a government that wants to remain in power), it would provide more economic flexibility in the long term to meet the Thai people's needs (which by extension are the nation's needs).

 

¹Two illustrations:

• It's likely the tax revenue from foreign investment in the EEC to begin paying for the government's supporting infrastructure by my estimate may take 10 years of more; 
• Use of 20-year foreign loans to finance various rail projects will divert government funds to service the debt and quite possibly leave little if any remaining funds (if not deficit spending) to finance government discretionary and/or social spending.

² Another two illustrations:

• The water intensive EEC development in the northeast has the potential eventually to pump millions of baht into the local economy while the water-based agricultural industry there stands to be almost immediately destroyed. The approval of the EEC development by a NCPO Article 44 Order intentionally bypassed local public review and consent to further exacerbate the differences between the national government's needs from the local public needs.
• Civil Service that is largely concentrated in Central Thailand granted 5% annual pay raises every year since circa 2015 versus a much lower and belated increase in the minimum daily wage for unskilled workers.

The Thai government debt is negligible and they have huge reserves of foreign currency  to hedge against a falling baht. Thailand is in a very strong position, but this does not flow down to the poor who benefit little from tourism or a strong baht. Inflation is low and that keeps wages low. The fiscal policies are working for now.

23 minutes ago, Srikcir said:

Civil Service that is largely concentrated in Central Thailand granted 5% annual pay raises every year since circa 2015 versus a much lower and belated increase in the minimum daily wage for unskilled workers.

Thats interesting, a hundred years ago, there were three distinctive groups in Thai society, The "Elites", The Civil Service & the Serfs, we can deduce in present day not much has changed, the Elites continue to prosper, the Civil service are doing "OK" & no change for the serfs, they remain in serfdom to maintain the folks higher up the food chain, obviously there is no intention to change.

Edited April 29, 20197 yr by CGW

4 hours ago, malagateddy said:

I think the exporting of rice and cement are positive factors in the Thai economy

Sent from my SM-G7102 using Thailand Forum - Thaivisa mobile app
 

Thai rice in my supermarket has been replaced by pakistani rice

Edited April 29, 20197 yr by heybuz
Spelling

I give out a little stimulus package to the local ladies about twice a week. It seems very appreciated and welcomed. It may not be the answer but I recommend everyone do their bit to support the local economy to the best and fullest of their ability.  

2 hours ago, Bert Jones said:

The Thai government debt is negligible and they have huge reserves of foreign currency  to hedge against a falling baht. Thailand is in a very strong position, but this does not flow down to the poor who benefit little from tourism or a strong baht. Inflation is low and that keeps wages low. The fiscal policies are working for now.

I don't believe inflation is low as it is not low in most countries but is made to appear low by misleading government data designed to protect the banking based system.  See the example.

 

http://www.shadowstats.com/alternate_data/inflation-charts