Without a doubt, there has been popular concerns about Thailand’s economy throughout and since the pandemic. While one of the largest economies in ASEAN, with formidable manufacturing and tourist industries, lockdowns and the decline of the tourist industry have negatively impacted the economy. This has led to calls for stimuli, and this is exactly what the new Thai government under Prime Minister Srettha Thavisin has promised.
According to Bloomberg, the PM has promised specific stimuli, namely cash handouts and lower energy prices, to boost the Thai economy. Digging deeper, we find debt suspensions for millions of farmers and small businesses – perhaps the traditional backbones of the Thai economy – and something quite novel: a 10,000-baht digital handout scheme, perhaps years ahead of New South Wales’s $100 voucher to spend at select businesses to boost the state’s economy post-pandemic. 10,000 baht can form close to an average workers’ monthly salary.
Whether the Thai stimuli will significantly help bolster the Thai economy remains to be seen. There remain considerable obstacles that may mediate the efficacy of the stimuli. One of the most important is whether there remain any more ‘surprise’ interest rate hikes for Thailand – as we saw several weeks ago, and which prompted the PM to meet with the governor of the central bank. Only the day before, the PM had confirmed plans to inject 560 billion baht ($15 billion USD) into the Thai economy, particularly through the ‘digital wallet policy’, a key element of the Pheu Thai Party election plank. Fortunately, rates may hold, particularly if inflation decreases to the 1-3% range, though this is of course not guaranteed. Another obstacle is US fiscal policy – US raising or maintaining high interest rates, leaving the US dollar stronger than the baht. This would mean that it requires more baht to stimulate the Thai economy – and possibly more debt. A higher US dollar may also mean more capital outflows from Thailand – frustrating attempts to stimulate the economy.
Recently, Thailand has introduced new rules to tax Thai tax residents who earn income from abroad – possibly meaning more money for the government to use for stimulus. It is not immediately clear how much the government would be able to obtain this way. In a worst-case scenario, perhaps this could provoke high-net-worth Thai tax residents to break ties with Thailand, and that money distributed to more tax-friendly countries. In the best-case scenario, Thai tax residents limit the amount of money they may send to Thailand. This underscores the importance of Thailand considering significant methods to obtain as much money as possible, at the lowest cost, and introducing significant stimulus methods. Of course, also being mindful of diverse factors, such as US fiscal policy.
Overall, Thai stimuli will certainly be news-worthy for those interested in the Thai (and wider ASEAN) economy. The policies and actions taken by the Thai government will play a significant role in shaping the country’s economic landscape and it will be interesting to see how the economy subsequently fares in the near- and long-term.
