Will More Borrowing Put Thailand Back On Track To Economic Growth & Recovery?

Will More Borrowing Put Thailand Back On Track To Economic Growth & Recovery?
Thai Business Box

Will More Borrowing Put Thailand Back On Track To Economic Growth & Recovery?

Thai government has decided to raise its debt ceiling as public spending continues to grow, to support the economy that has been battered by the coronavirus pandemic, increasing the cap on its debt-to GDP ratio from 60 percent to 70 percent.

From the government’s perspective, the higher debt ceiling will enable officials to take additional economic measures while maintaining good debt servicing ability.

Critics of the government agree that the country needs to borrow more but are apprehensive about whether the government will channel spending in the right direction to put Thailand back on track towards economic recovery and growth.

 Since the pandemic began, the government has incurred 1-5 trillion baht in borrowing, including a 500 billion baht plan approved this year, and introduced a range of  stimulus packages and relief measures.

Opposition say that the government’s stimulus packages such as Rao Chana(We Win), Rao Rakkan (We Love Together) and Rao Tiew Duaikan (We travel Together) did not do well because it was rewarding people for spending at a time when most are going through financial difficulties in a battered economy, while the relief measures did not arrive for people in a timely manner.

The government’s vaccine mismanagement had plunged the country’s economy down a steep slope, with only an expected 0.7% GDP growth for 2021, following a 6.1 percent drop of GDP in 2020, one of the worst performing economies in ASEAN, due to lockdowns and delayed reopening of the country where tourism made up for 20% of GDP. Thousands of small businesses shut down and will never re-open.

The confidence in the government to pick up the economy is at an all time low, keeping in mind the government’s performance pre-COVID-19 was lacklustre at best with a GDP growth rate of 2.27% in 2019.

Bank of Thailand Governor Sethaput Suthwartnarueput said the country would need to borrow a further 1 trillion baht.

Public confidence is essential to jumpstart the economy again, specifically, confidence in the plans of policy makers on how they plan to spend the budget to bring back the economy to a path of growth. 

The government would therefore be well-advised to present a plan and outline  the projects that they intend to implement to bring unemployment down, restart and support small businesses which account for the majority of jobs, investments in digitization and the use of new technologies, pursue productivity & income-  raising investments, support re-skilling of workers and redesigning of entrepreneurship support to encourage emergence of SMEs that can be the pillars of a new economy.

Without a well thought out economic recovery and growth plan, the government may find that no matter how much they borrow and spend, they will not be able to reassure or bring back the confidence of Thai & foreign investors that is the key in stimulating  the economy.

By - Thai Business Box.