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After securing parliamentary support to assume the role of Thailand’s new Prime Minister, all eyes are on the real estate tycoon Srettha Thavisin and his Pheu Thai Party (PTP) as they endeavour to reenergize Thailand’s economy, given the country’s position as one of Asia’s weakest performers in 2023.
Earlier, the country’s progressive Move Forward Party achieved a victory in the May election this year. However, their path to leadership was obstructed when party leader Pita Limjaroenrat fell short of the majority required from Thailand’s bicameral National Assembly to secure the top position.
Consequently, Pheu Thai, Thailand’s second-largest political party, announced last week the formation of an 11-party coalition, collectively holding 314 votes, to establish a new government. This new leadership is set to assume control at a time when Thailand’s economic performance has been lacklustre due to a decline in exports and investments during the first half of 2023.
Additionally, the mounting cost of living and decreasing agricultural incomes are placing substantial pressure on households, particularly in the northeastern region of the nation. As a result, Thailand’s economy recorded a year-on-year growth rate of 1.8% in the April-June period of 2023, a decline from the 2.6% year-on-year growth witnessed in the preceding quarter.
Meanwhile, the country’s central bank recently indicated that the previously projected 3.6% annual economic growth for 2023 might need to be revised downwards. Faced with this situation, the new PM Thavisin, who also has assumed the role of Finance Minister, will want to fulfil the promises he made during his election campaign.
“I’m doing this because I want to improve the country and the economy…I’d like to emphasise again. My enemy is people’s poverty and inequality. My goal is a better livelihood for all Thai people,” said Thavisin on the social media platform X.
Proposed government spending to help Thailand’s economy?
While Thailand’s elections were underway, politicians from various parties engaged in a competitive bid to surpass each other by pledging billions of dollars in relief to Thailand’s economy. An assessment conducted by the Thailand Development Research Institute revealed that the implementation of the electoral commitments made by nine political parties would necessitate an annual expenditure of approximately $92 bn.
Thavisin didn’t refrain from making big promises to the Thai people himself. During the campaign trail, he articulated his plans to elevate the country’s minimum wage to 600 baht ($17.02) by 2027, a significant increase from the existing 328 baht ($9.20).
His agenda also encompassed guaranteeing a monthly income of 25,000 baht ($709.22) for graduates by 2027 and delivering a 10,000 baht ($283.69) digital payment to individuals who attain the age of 16 by April 2024. Additionally, a substantial commitment to allocate 300 billion baht ($8.51 bn) for senior citizens, constituting 1.6% of the country’s GDP, was part of his proposed measures.
Moreover, the Pheu Thai Party has outlined plans to triple farmers’ incomes, offer a three-year reprieve from farm loan repayments, and expand irrigation to cover 8 million hectares, a 40% increase, over its four-year term. It has also said that it will commit to reducing electricity tariffs, actively pursuing free-trade agreements to attract foreign investments, and exploring the legalisation of gambling, a move likely to receive positive market reception.
Furthermore, there are plans to simplify visa rules for Chinese tourists, which could contribute to the recovery of the tourism sector, which accounted for around 18% of the country’s GDP in 2022. Previously, in 2019, Chinese tourists made up the bulk of international tourists visiting Thailand, amounting to 11 million or 28% of all international tourists. In comparison, only 1.6 million Chinese tourists visited Thailand in the first half of this year.
“The confirmation of a new government should allow progress on important economic legislation. However, there could be some delays in the budgeting process…Significant delays could slow the disbursement of capital spending for new investment projects, though we believe there would be a lower impact on current spending,” said Fitch Ratings.
“We expect social welfare expenditure and other measures advocated by the PTP and its coalition allies during the election campaign to constrain fiscal consolidation efforts…Higher public spending could offset some of the headwinds facing the economy in the near term…,” the assessment added.
