Economic package in the works

[webfact]

Economic package in the works 

By   THE NATION 

 

 

THE Finance Ministry will propose extra fiscal measures to boost the domestic economy that has been adversely affected by falling exports.

 

“Officials have been working to come up with a stimulus package, as we expect the economy to slow down e second half of the year. The economic package would be proposed to the new government,” said Lavaron Sangsnit, director-general at the Fiscal Policy Office.

 

His comments came amid a slowdown in the Thai economy due to the impact of the trade tensions between the US and China. Thai exports in the first four months contracted by 1.9 per cent year on year.

 

“We are hoping the economy does not see a sharp slowdown, hence the stimulus would not be a big one, as exports are not expected to contract significantly,” he said.

 

The Finance Ministry projects that trade tensions between the world’s two largest economies would ease as leaders of the United States and China will meet at the G20 summit.

 

The stimulus package will be aimed at boosting consumption among low-income groups as they have a tendency to spend all the money that government puts into the economic lifeline, he said. 

 

The ministry will also offer tax incentives to the middle-income group in order to encourage them to spend more. Usually, middle-income group spends about 80 per cent of their earnings, he said.

 

Recently, the government provided tax incentives for those who go shopping and travel in the country. The new measures may include a Bt1,500 allowance to citizens for domestic travel, according to Lavaron. 

 

Asked about the impact on public debt due to the series of economic stimulus packages, Lavaron said the ministry has the fiscal space to spend more and it would not affect fiscal discipline. 

 

Limited fiscal space 

 

Officials at the ministry, however, revealed that the government has only limited fiscal space for spending to boost the economy.

 

The fiscal discipline law caps quasi-fiscal measures or loans from state-owned banks at 30 per cent of annual budget and the current government has already used up 28 per cent, they said. 

 

The government has set annual spending for 2020 at Bt3.2 trillion, up from Bt3 trillion for the 2019 fiscal year. The 2020 fiscal year starts in October. 

Previous quasi-fiscal activities to finance government projects have played a key role in increasing public debt and public contingent liability.

 

 Meanwhile, Somprawin Manprasert, chief economist and executive vice president, head of research division at Bank of Ayudhya Plc (BAY), is sceptical about how effective a new stimulus package can be. 

 

It cannot do much as the world economy has been slowing down, he said.

 

BAY projects that Thai exports will contract by 1-1.5 per cent this year, down from the previous projection of 3.5 per cent rise. Economic growth will decelerate to 3.2 per cent this year against the previous projection of 3.8 per cent growth.

 

Some farmers and small businesses deserve public support, as they were affected greatly by the falling prices of farm products and export contraction, he said. He agreed that extra public spending would be appropriate but a policy rate cut would not work.

 

Athiphat Muthitacharoen, an economist at Chulalongkorn University, said he was worried about the impact of fiscal discipline due to many rounds of short-term economic stimuli. 

 

While short-term measures might not help much, the government should think about long-term impact, he warned. 

 

Source: http://www.nationmultimedia.com/detail/Economy/30370493

 

-- © Copyright The Nation 2019-06-04

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[Srikcir]

5 hours ago, webfact said:

We are hoping the economy does not see a sharp slowdown, hence the stimulus would not be a big one

But as

5 hours ago, webfact said:

The economic package would be proposed to the new government

Even if accepted in full by the new government (whenever that will occur), it won't be immediately enacted. Apart from whatever economic agendas the new government may have, there would no longer be a "rubber stamp" NLA to immediately authorize additional off-budget funds (FY2020 budget already passed) for the proposal.  

What might be a more significant and immediate action is for the BoT to raise interest rates and lower the value of the baht to make it more competitive for exports.

[Eric Loh]

First order of the day for the new fiscal package is to review the excessive defense budget, cancel those military procurement, abolish conscription (save billions) and reduce the size of the Generals still being paid for not doing much. Use that over stretched and opaque budget to raise wages. 

[stanleycoin]

1 minute ago, Eric Loh said:

First order of the day for the new fiscal package is to review the excessive defense budget, cancel those military procurement, abolish conscription (save billions) and reduce the size of the Generals still being paid for not doing much. Use that over stretched and opaque budget to raise wages. 

BMW, and Mercedes-Benz, will most likely see a fall in profits, if that all happened. 

But on the bright side, sales of Honda Scoopy's will go up. 

[Cadbury]

6 hours ago, webfact said:

“Officials have been working to come up with a stimulus package...."

More like ........officials have been working on a stimulus package to fill the greedy pockets of officials, business elite, military generals and politicians. I doubt such stimuli do anything for those outside this self serving clique. 

I read elsewhere where others are predicting an export growth rate for Thailand of zero. One of Prayut's visions perhaps. By comparison Vietnam's export growth rate is running at about 12.3%. 

 

 

[neeray]

7 hours ago, webfact said:

His comments came amid a slowdown in the Thai economy due to the impact of the trade tensions between the US and China. Thai exports in the first four months contracted by 1.9 per cent year on year.

Can't help but wonder if blaming the US and China tensions isn't just a handy default excuse for the real reason why a slowdown. Maybe, just maybe, it's got something to do with the governing over the last 5 years.

[Bert Jones]

The BoT is a cartel of wealthy individuals. Just like the BoE and the FED. They are private entities. When it suits the wealthy, the Thai baht will be dropped, reversed and the huge foreign currency reserves will be sold into the market making another fortune for the 'club' members. Like a famous American comedian once said...'it's a big club and you aint innit!'

[Kasane]

Thai economy is struggling, like most others in the world, as the two economic powerhouse, USA and China,  wrestle each other to a standstill. China may well come out ahead with their lead in AI patents, 5G supremacy, and overwhelming STEM grads resource.

[Redline]

Sounds their assumptions are unrealistic