A tall order for the new government
Voters wonder if the Move Forward Party can deliver on its campaign promises, writes
An online entrepreneur using the alias Maddy was among the record turnout of almost 39 million Thais who cast a ballot in the general election earlier this month. After the Election Commission announced the unofficial results, voters for the Move Forward Party (MFP) rejoiced at the victory.
Yet the recently rewritten constitution creates a roadblock for non-military political parties.
With 313 members of parliament in the MFPled coalition, the group still needs more votes from the upper house to secure the 376 seats needed to lead, causing concerns about the political direction of Thailand.
BUSINESS OUTLOOK
The 25-year-old entrepreneur Maddy is unsure about the nation’s economic prospects as the winning parties have been unable to form a coalition government thus far.
Maddy voted for the Pheu Thai Party because its digital wallet platform and other economic policies fit her interests as a business owner.
“I want the government to collect taxes from outsiders who open an illegal business or evade taxes, as that could bring in a lot of revenue for the country. For example, there are many marijuana shops owned by Chinese and other foreigners in Chiang Mai. The cannabis is not from local growers, who should receive support from the government,” the Chiang Mai-based shop owner told the Bangkok Post.
“We have to see how the coalition government is going to turn out. If the new government can help support both small and big businesses as the parties promised, I believe that would really benefit the economy.”
According to Kasikornbank’s research unit (K-Research), a delay in forming a new government could push back the approval of the annual budget bill for fiscal 2024, affecting budget disbursements from the fourth quarter of 2023.
Moreover, the new government could face fiscal constraints as campaign pledges such as easing living costs caused by high energy prices require a significant amount of budget.
“Although these pledges could stimulate short-term growth for the economy, they could lead to a budget deficit given the limited revenue sources,” noted the think tank.
“Budget allocation might be insufficient, while tax collection also needs a lengthy period for the economy to expand.”
BURDENSOME DEBT
Economists project if the government has to run a higher budget deficit to implement short-term economic policies, the cost of government debt will become more burdensome once Thailand’s policy rate reaches 2%.
SCB Economic Intelligence Center (SCB EIC) expects the central bank’s Monetary Policy Committee to gradually raise interest rates to a terminal rate of 2.5% in the third quarter, which is consistent with the economic outlook and continued inflationary pressure.
According to K-Research, excessive government debt could lead to competition with the private sector for capital resources.
The think tank advises the government to take into account the distribution of debt, or else it will increase costs for the private sector at a time when the economy is recovering.
EAGER FOR CHANGE
Despite the challenges, Tritdhamon Chanthanapaiboon is somewhat optimistic after the election result. The 24-year-old graduate is among the enthusiastic voters who wish to see Thai democratic reform.
“I am not too concerned with the way things are going, as I think they will eventually form a successful coalition. In the long term, we will have to see how the MFP performs and if it delivers on its promises,” said Ms Tritdhamon, who voted for the MFP.
“Raising the daily minimum wage to 450 baht could help workers with living costs, while farmers could diversify their sources of income with the Progressive Liquor Act.”
K-Research projects GDP growth of 3.7% this year after the economy expanded 2.7% yearon-year in the first quarter and 1.9% from the previous quarter.
The growth was driven by tourism, which increased the service sector’s activities by 87.8% year-on-year.
Analysts predict the Thai economy faces risks from a slowing global economy, including factors such as geopolitical conflicts, commodity price volatility, the tight monetary policy of major central banks, and the ongoing crisis in the banking sector of Western countries.
According to SCB EIC, the outlook for exports this year appears gloomy, growing 1.2% in value amidst downside risks from the global economy.
Exports are expected to contract in the second quarter, then expand in the second half of the year as Chinese demand strengthens.
“As a result, the current account is likely to have a surplus this year from both trade and service balances,” noted the research unit of Siam Commercial Bank.
“Political instability is an internal risk that must be monitored. Although the likelihood that the liberals will form a government has increased greatly after the informal election results were announced, there is still a high degree of uncertainty. The push for the new government’s policies should begin to have positive effects on the economy.”
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In the long term, we will have to see how the MFP performs and if it delivers on its promises. TRITDHAMON CHANTHANAPAIBOON Voter