A claim that Thailand can return to a 5% GDP growth rate made by Srettha Thavisin in Khon Kaen on Saturday is at odds with the trend with the Bank of Thailand cutting back its projection to 3.6% for 2023 with even this moving out of reach amid flagging exports and a darker external environment with serious problems in China and rising geopolitical discord.

Pheu Thai ministers taking up cabinet positions, this week, including the new Prime Minister and Finance Minister Srettha Thavisin and Deputy Prime Minister Phumtham Wechayachai at the Ministry of Commerce have been greeted with sobering economic data showing that the kingdom’s economy, still reeling from the devastation of the pandemic, is struggling to achieve target growth rates for the year with the Bank of Thailand reducing projected growth to 3.6% while figures for the second quarter and the first half of the year show impaired GDP growth of between 1.8% to 2.2%.

Newly appointed Deputy Prime Minister and Minister of Commerce Phumtham Wechayachai arrives at his ministerial office in Nonthaburi on Thursday. (Right) Prime Minister Srettha Thavisin in Khon Kaen on Saturday as he toured Thailand’s northeastern provinces and addressed the concerns of the farming community.

The new Minister of Commerce and Deputy Prime Minister Mr Phumtham Wechayachai took up his post on Thursday at the Commerce Ministry in Nonthaburi province near Bangkok.

The Commerce Ministry is a wide-ranging government portfolio, that controls offices such as the International Institute of Trade and Development, the Department of Trade Negotiations, the Department of International Trade Promotion, the Office of the Permanent Secretary, the Office of the Trade Competition Commission, the Department of Foreign Trade, the Department of Intellectual Property and the Department of Internal Trade, the Department of Trade Negotiations and the Office of the Minister itself.

New Commerce Minister Phumtham Wechayachai promises to chase down and open up new export markets as demand from China falls and output dips

Deputy Prime Minister Phumtham emphasised that the new government of Prime Minister Srettha Thavisin would be prioritising efforts to rein in the cost of living for the less well-off in Thailand and the population across the board, as well as chasing down new export markets for the kingdom as it suffers from the deterioration which is being seen from an economic implosion in China and impeded demand worldwide.

Export output has now fallen for 10 consecutive months in a row.

This is being driven by rising interest rates which are being ratcheted up by an aggressive Federal Reserve policy in the United States aimed at reining in inflation.

Currently, the somewhat more resilient economy in the United States is showing signs that inflation could reignite, which in turn puts pressure on monetary policymakers to raise interest rates further. 

The particular problem for Thailand is that even at a current lending rate of only 2.25% compared to 5.5% to 5.75% in the United States, there are already signs of distress and instability in the Thai credit market in the face of higher borrowing costs. 

Economic data suggests that the economy has not yet repaired itself from the devastation caused by the pandemic shutdowns which hit the less well-off

It comes with economic data emerging showing the Thai economy is still not fully recovered from the damage inflicted by the pandemic with even the very well-off having suffered in terms of income earning ability while the poorest and the less well-off are still seeing income levels retarded from the situation that emerged in 2020 when the pandemic shut down large segments of the economy. 

On Tuesday, the Bank of Thailand reduced the country’s projected growth rate to 3.6% for 2023 but this figure lacks credibility given the 1.8% recorded in the second quarter of 2023 with only 2.2% growth seen in the first six months and exports continuing to decline.

Thailand now has the worst-performing economy in the ASEAN community outside Myanmar which is a state engaged in a civil war which has ravaged that country since February 2021.

2022 survey showed that the poorest 20% had only seen income return to 62% of that seen in 2019 while even the top 10% had not yet fully recovered

Before the Minister took up office this week, the Director General of the Trade Policy and Strategy Office at the Ministry of Commerce, Mr Poonpong Naiyanapakorn, confirmed that lower-income groups in the kingdom have been slower to return to normal than those with higher incomes. 

He cited a UNICEF study conducted in Thailand which divided the kingdom’s population into five groups or strata.

The survey showed that at the end of 2022, the least well-off had only returned, at that stage, to 62% of the income they were generating before the pandemic hit while the fourth strata or low-income groups had attained an income of 73%.

However, the report also highlighted that even the highest income groups and earners were still suffering from the country’s disastrous shutdowns.

In the top 40% of those surveyed, income levels were still 10% off where they were two years after the pandemic hit.

2023 began well but has gone downhill with foreign tourism driving growth and even this is well off the revenue level seen four years ago in 2019 

It is thought that the Thai economy recovered quite significantly in the first few months of 2023 with the full reopening of the country’s foreign tourism sector, but figures in recent months show that even this is slowing down as the country’s first-half growth figures demonstrate.

There are also fears that the foreign tourism recovery may be levelling out with 18 million visitors being welcomed up to September 3rd 2023.

The country should see 28 to 30 million visitors in 2023 or 75% of the number seen in 2019 but 45.4% of the visitors so far this year are from Malaysia, China, South Korea, India and Russia, which lead the arrivals table.

Income earned per visitor is already 16% off what it had been in 2019 because of the altered nature of foreign tourists to Thailand, which has become more Asia-centric with shorter vacation periods. 

Prime Minister Srettha and Commerce Minister rule out a return to Pheu Thai’s disastrous rice pledging system introduced by the 2011 to 2014 government

On Thursday, Deputy Prime Minister Phumtham was coy when asked by reporters about the possibility of the new Pheu Thai government reintroducing a rice-pledging scheme which had disastrous implications for the government of Miss Yingluck Shinawatra in office from 2011 to 2014.

This was indeed ruled out by Prime Minister Srettha Thavisin on Saturday who instead promised more targeted efforts to boost farm incomes for the people of Northeast Thailand as he toured the region promising lower fertiliser and insecticide costs as well as new water irrigation schemes.

The PM also underlined his government’s immediate plans to lower electricity tariffs.

Scorching electricity costs may sear the economic recovery with a new threat to reduced inflation

Prime Minister Srettha also talked about the newly installed Minister of Foreign Affairs Parnpree Bahiddha-Nu-Karak using his expertise to amend current trade agreements with other countries to benefit Thai farmers, in a Trumpian move.

Mr Srettha suggested his government was targeting 5% growth, something some analysts have predicted that Thailand with chronic demographic problems as well as a lack of inward investment and development, is unlikely to see again in the medium term.

The new Prime Minister also highlighted plans for a moratorium on debt repayments linked to farmers.

Thailand’s days of GDP growth in excess of 5% may be a thing of the past as it has grown too old
Economy tanks as demand for loans surges with an acute credit crisis and falling export output reducing growth

Deputy Prime Minister Thumtham, on Thursday, would only say that the government’s policies dealing with the sale and distribution of agricultural products would be assessed by the cabinet in due course.

New Prime Minister Srettha talks of returning to a 5% growth rate through forging new export markets and renegotiating existing trade agreements

He did confirm however that the signature policy of the Pheu Thai Party which is the ฿10,000 digital wallet giveaway, scheme which has been resurrected after the election of the new government, would go ahead using blockchain technology. 

Mr Phumtham highlighted that as well as providing an uptick in demand in the domestic economy, the introduction of blockchain technology would further develop the proficiency of the Thai public when it comes to engaging with the digital economy.

The new blockchain technology will also mean that the monies spent on the project, which will require a budget of ฿560 billion, will only be spent on approved products and services and will not be able to be used to purchase alcohol or goods and services of a negative nature.

The new Minister of Commerce is taking up his role with exports for the first 7 months of 2023 showing a 5.5% decline to $163 billion while imports came in at $172 billion, off by 4.7%, giving the economy a trade deficit of $8.28 billion.

Baht has declined since Srettha was elected

Even more disturbingly, the economy showed a current account deficit of $444.94 million in July, with reduced remittances and a rising trade deficit for the month when compared to June.

The Thai baht has also lost ground against the dollar since Mr Srettha was elected Prime Minister on August 22nd, falling in value from ฿34.94 baht to the dollar to ฿35.57 to the dollar as of Friday the 8th of September. 

This has come with news that economic growth projections are being revised by bodies in Thailand and outside the kingdom in the light of a darkening economic picture. 

The situation is not being helped by growing geopolitical discord with international summits taking place this week where the leadership of China and the United States appear to be on a divergent course, with an ongoing war in Ukraine and deepening and more dangerous tensions emerging in Asia over the South China Sea and China’s designs on Taiwan. 

Over the weekend, it was reported that US military planners have discreetly enquired to their counterparts what India’s potential response will be if war breaks out in the Indo-Pacific over a feared Chinese invasion of Taiwan.

Inflation remains elevated in a domestic market with retarded manufacturing activity and tighter credit leaving the less well-off unable to cope

This week, Mr Poonpong of the Ministry of Commerce, in a briefing to reporters, before the new minister took up office, highlighted relatively higher inflation costs in the kingdom, impacting the less well-off in a market where access to borrowed money is becoming more difficult, leaving many at the bottom of Thai society economically, unable to meet even the basic necessities of living.

These are chronic difficulties in an economy which have not been relieved by any form of robust growth.

The prolonged nature of this downturn has decimated what is known in Thailand as the grassroots economy largely composed of informal businesses including small traders many of whom were put out of business during the pandemic in 2020 and 2021 and have not returned to normal. 

Even within the country’s tourism industry, there are many indebted hotels, particularly smaller enterprises, that have outstanding loans which cannot be sustained.

Calls for more emergency measures

This week, Mr Poonphong called for the involvement of the Finance Ministry in conjunction with the Bank of Thailand and the country’s Labour Ministry to address the possibility of renewed debt suspension initiatives, new funding support and long-term low-interest loans. 

The senior executive with the ministry also called for practical retraining of those within the informal sector including small entrepreneurs who need to be taught how to adapt to the digital economy.

The ministry official said the training of entrepreneurs in the arts of business development in a digital context was a key area that must be addressed by the new government.

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