New ฿100 billion stimulus package will not require extra borrowing as the government still maintains a prudent fiscal approach with a growing emphasis on restarting the economy and carefully reopening the country’s borders. The Prime Minister is now tipped to name a former Transport minister in the previous junta administration as the new senior minister at Finance.
As the Thai Prime Minister gets set to appoint a new Finance minister, the kingdom is welcoming its first economic glimmer of hope since early this year as the contraction in exports appears to be slowing and the Bank of Thailand, this week, lowered slightly its GDP contraction prediction for the country. However, the kingdom is still facing the key question of how it will reopen its borders to tourism to allow it to achieve a fraction of what it achieved in 2019 to have any hope of fulfilling a small growth rate in 2021 of 3.6%.
There is fevered speculation in Bangkok as to the Prime Minister’s choice of a new Finance minister following the shock resignation of Mr Predee Doachai in early September after only 27 days in the role.
General Prayut Chan ocha has indicated that he will fill the position by early October but as recently as Saturday, he suggested that only he knows who will be taking up the role.
The new finance minister will be joined after October 1st by Thailand’s new Bank of Thailand Governor Sethaput Suthiwart-Narueput, a former aide to General Prayut and current member of the Monetary Policy Committee at the central bank.
Top civil servant tipped for Finance Minister up to this weekend based on numerous and credible reports
Up to the weekend, it was speculated that it would be the permanent secretary at the Ministry of Finance, Prasong Poontaneat with numerous, credible reports of the senior civil servant resigning directorships and suggestions that his management style had impressed the PM.
Former Transport minister’s name has emerged
In the last 24 hours, the latest name to emerge is former Junta Transport Minister, Arkhom Termpittayapaisith, known for his efforts in the former administration to improve rail communication links within the kingdom.
Mr Arkhom is also linked to the predecessor body of the National Economic and Social Development Council where he served as Secretary-General.
It is still possible that the prime minister may surprise pundits as other names have been linked to the role including Chartchai Phayuhanawee, a former President of the Government Savings Bank.
New Finance Minister must be ready for politics
Politically, the PM will also be aware of the influence of current Deputy Finance Minister Santi Promphat who, this year, has let it be known that he is ready to take on the role.
Mr Santi is a powerful influence within the ruling Palang Pracharat Party and owns the building that the party rents as its national headquarters in Bangkok.
Many observers surmise that any new Finance minister must be ready for the political challenges or pressure that the job will undoubtedly entail.
Deputy Prime Minister bullish about ฿100 billion stimulus package with discounts at the point of sale
This week, as he announced ฿100 billion in new stimulus measures to prime the economy between now and the end of December, the Deputy Prime Minister with oversight of the economy, Supattanapong Punmeechaow, also revealed that the government was maintaining a prudent approach to borrowing and planned to fund the initiative from its normal budget.
The stimulus measures include discounts, at the point of sale, for 14 million welfare cardholders at more traditional outlets. This scheme will see a budget of ฿21 billion being disbursed.
‘Let’s go halves’ scheme to boost consumption
Meanwhile, a further 10 million Thais will be targeted in a promotion called Kon La Khreung meaning Let’s Go Halves where shoppers will get discounts at stores on food, beverages and household items.
The scheme will exclude lottery tickets, alcohol and tobacco products. Each participant may avail of ฿3,000 in discounts per person capped at ฿100 per day with a budget of ฿30 billion.
A third scheme, with a budget of nearly ฿20 billion, will offer to pay 50% of the salaries for up to 260,000 new Thai graduates who are employed by firms within the private sector.
No secret that the kingdom is facing a challenging and difficult economic situation even into 2021
The government is making no secret of the challenging economic situation confronting the country.
Exports fell by nearly 8% in August compared to an 11.3% drop in July. However, this was better than predicted with a Reuters report suggesting that the common consensus was for a fall in excess of 12%.
The slight improvement in the outlook has led the Bank of Thailand to amend its contraction forecast for Thailand in 2020 from 8.1% to 7.8% based on a lower level of export contraction for the year now forecast at 8.2%
The impact of an improvement in the export outlook, as with the foreign tourism industry, is immediate as the two combined make up 70% of the Thai economy.
Drop in new company registrations in August
Thailand also recorded a 7% drop in new company registrations in August at 5,538 compared to last year with share capital coming in at ฿14.31 billion.
However, the number of businesses closing in August saw a 24% drop compared to this time last year albeit a 6% rise from July.
These figures were delivered by the Director-General of the Department of Business Development, Sorada Lertapachit.
Inward investment in the Eastern Economic Corridor area is down by 12.5% so far this year
Investment in the Eastern Economic Corridor from January until August was down 12.5% on last year with 4,353 companies, mostly in Chonburi and focused on the service sectors as well as property, construction and food. These groups were followed by retail and manufacturing concerns.
Foreign investors comprised 40% of these firms with Japan leading the way as Thailand’s main investor nation with 48% of all projects followed by China at 11.1% and Singapore at 4.56%.
The department indicated that Rayong was the province that attracted most new foreign investment at just over 52% which was focused on the automotive industry and the production of parts.
Less GDP contraction in 2020 but less growth in 2021 as ministers confront foreign tourism dilemma
The slight signs of improvement come as the government’s economic leadership team pushes for a gradual movement towards the resumption of foreign tourism, and has also seen the Bank of Thailand reduce its prediction for economic growth next year to 3.6%.
Even this would still be dependent on the economy welcoming 9 million foreign tourists which under the current regime, even after October, with the first long-stay visa tourists arriving in Thailand, is difficult to see materialising without wider access to the kingdom via passenger flights and a less demanding screening system than the current 14-day mandatory requirement in alternative state quarantine.
The government is planning to look at this during October but must also balance its commitment to public health as a priority with the economic imperative given the dangerous threat that still lurks outside the kingdom’s borders.