Thailand
Thailand: Private sector sees economic light
Political uncertainties clouding the economy will likely ease to some extent with the new cabinet in place, but the private sector remains concerned about the ability of the 19-party coalition government to deliver policies.
Kalin Sarasin, chairman of the Thai Chamber of Commerce, said it’s too early for the private sector to make any comments or express any concerns about the new economic ministers.
After the new government outlines policies to parliament, the private sector will give the measures some time, closely monitor their administration and be ready to advise on priority issues, Mr Kalin said.
“The most important thing is cooperation within the coalition government, especially on the economic front,” he said. “While the economic ministers come from different parties, their economic management must move in the same direction.”
Mr Kalin proposed that the top priority and urgent issues for the new government be people’s cost of living and the acceleration of state spending on delayed projects and megaprojects, be they roads or double-track rail networks nationwide.
The government should also focus on digital transformation, which will lead the country to future development and narrow income disparity, as well as tackle obstacles to export and border trade.
The government is being urged to manage the baht’s strength, promote the use of the baht as a key currency in trading with neighbouring countries and raise the productivity of the farm sector.
Baht curbs urged
Tourism leaders have called for better management of the local currency from the new government, as the soaring baht has trimmed the number of international visitors significantly in recent months.
For the first six months of 2019, the number of foreign visitors grew by a mere 0.7% to 19.6 million, generating 1.01 trillion baht in income, up 0.3% year-on-year.
Vichit Prakobgosol, president of the Association of Thai Travel Agents (Atta), said the urgent task, especially for the Bank of Thailand, is to cut the policy rate to handle the baht more efficiently.
The strong baht has affected tourism as travellers tend towards other destinations with cheaper tourism costs, he said.
The baht is the top-performing currency in Asia, up about 6% against the US dollar this year. According to data compiled by Bloomberg, the baht has climbed 8.6% against the greenback in the past year, making it the world’s best performer.
Led by the Federation of Thai Industries, the private sector recently urged the Bank of Thailand to cut the policy rate as a means to curb the baht’s rapid gain and boost sagging exports and the economy.
“Most tourists who come to Thailand are middle class and make overseas trips once or twice a year, so they may choose other destinations that have better value for their money,” Mr Vichit said.
But Atta members that operate inbound tourism see those tourists who opt for Thailand as more price-conscious and spending less to offset higher travel expenses stemming from the stronger baht.
Mr Vichit is concerned that if the baht rises to 29 baht to the dollar, the damage will be too far gone and Thai tourism will lose business opportunities in the coming high season.
The baht’s appreciation has already slowed bookings for the high season, he said.
Mr Vichit urged the new tourism and sports minister to consider the extension of the waiver of the 2,000-baht fee for visa on arrival for 21 nations until next March, from Oct 31 this year. The waiver drew visitors from China, India and Taiwan despite sluggish circumstances, he said.
Stimulus likely
Even though the new government has just formed, the Prayut Chan-o-cha administration has had no time to enjoy victory: the economy faces setbacks on both the internal and external fronts, and economic stimulus is expected.
SCB co-president Apiphan Charoenanusorn said the new government bolsters investor confidence, given the political clarity.
The new government will likely launch a fresh economic stimulus package and this will help rev up economic growth momentum, she said.
The government is expected to unveil economic policies related to state welfare, farm price subsidies, lower personal income tax and an increased daily minimum wage at the end of this month, said Apichat Poobunjirdkul, senior strategist at Tisco Securities.
The new government is also expected to accelerate infrastructure investment projects, especially those related to the Eastern Economic Corridor initiative, Mr Apichat said.
These economic policies are projected to inject capital worth 350 billion baht into the economy, equivalent to 2% of GDP, he said.
The capital injection will occur in the final quarter at the latest, Mr Apichat said. Whether these policies can be fully executed is yet to be seen, as there could be limitations on increasing budget deficits.
Citi Thailand economist Nalin Chatchotitham said analysts are still waiting to assess the new government’s policies, but the new administration should consider both short- and long-term measures to drive the economy forward.
The government may want to accelerate several ongoing infrastructure projects to be completed by this year, since the country needs a dose of internal stimulus to resuscitate economic momentum, Ms Nalin said.
Accelerated government spending will also help to rein in the baht’s appreciation because of an increase in imports, she said.
If economic conditions still don’t recover, a short-term stimulus package should be executed immediately, Ms Nalin said.
Supant Mongkolsuthree, chairman of the Federation of Thai Industries, said the new cabinet appointments seem well-suited for each ministry and the FTI believes the cabinet is ready to carry out public work and forward new projects.
“The new ministers have background and experience in economic and business sectors, so there are no worries for any obstacles and interruptions,” he said.
Mr Supant said the FTI is calling for the new coalition government to speed up state budget disbursement and carry out ongoing and delayed projects such as megaprojects in the Eastern Economic Corridor and improve crop prices for local farmers.
“The stimulus measures for the rural poor are urgently needed,” he said.
The FTI disagrees with increasing the daily minimum wage to the promised 400-425 baht per day, as economic sentiment is not right for an increase in wages, Mr Supant said.
Source: https://www.bangkokpost.com/business/1710867/private-sector-sees-economic-light