New Thai PM’s Reform Agenda Lacks Specifics, Economists Say
(Bloomberg) -- Thailand’s new prime minister has a roadmap to deal with the most pressing issues ranging from a near-record household debt to a tepid growth rate and an aging society. But the plan is short on details that would ensure time-bound outcomes, according to economists.
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Paetongtarn Shinawatra, who was sworn into office last week, outlined her government’s top 10 priorities at a joint sitting of the parliament on Thursday. The blueprint includes steps to tackle the more than 16 trillion baht ($476 billion) of household debt, modernize the country’s farm sector, overhaul the energy and utility procurement terms to lower costs of living as among the priorities. She also highlighted the need for an urgent economic stimulus for the poor.
Under Thai laws, a new government can begin its work only after making a policy statement before the parliament, with the blueprint serving as a framework for governance during its tenure. As the broad strokes of Paetongtarn’s plans were already out, the public and financial markets are keenly awaiting finer details including implementation time-lines from ministers when they respond to questions from lawmakers through Friday.
In the case of the sweeping debt restructuring, the government hasn’t provided many details besides naming key beneficiaries such as home and auto loan borrowers, and small businesses and identifying the institutions to implement them.
“These are steps in the right direction, but it will boil down to details and policy execution,” said Krystal Tan, an economist at Australia & New Zealand Banking Group Ltd., referring to Paetongtarn’s blueprint. “A stable political climate and political will to carry out the required reforms will be critical to improving the economy’s long term growth prospects.”
With Paetongtarn’s rise to the top job coming in the wake of her predecessor’s ouster and the dissolution of the nation’s largest opposition party, political stability is seen as key to the new government’s ability to follow through with its pledges. The third member of Shinawatra clan to lead Thailand is already facing a barrage of legal petitions seeking her ouster, stoking concerns of fresh political uncertainty.
Paetongtarn’s immediate priority will be to take steps to sustain a post-pandemic economic recovery that has lagged the pace of neighbors like Indonesia, Philippines and Malaysia. The recovery is hindered by structural issues which have hurt the country’s manufacturing and exports and a chronic indebtedness among its 20 million households.
The new government is also set to announce this week a cash handout of about 145 billion baht to an estimated 14.5 million people classified as economically vulnerable and those with disabilities. The stimulus pales in comparison to former premier Srettha Thavisin’s pledge to give away 10,000 baht each to about 50 million adult Thais at an estimated cost of $14 billion.
A scaled down stimulus can free up funds that the government can use to assist small businesses and pursue other projects, according to Kirida Bhaopichitr, an economist at the Thailand Development Research Institute.
What Bloomberg Economics Says...
“I’m concerned about the government’s focus on cash handouts and debt moratoriums, rather than measures that improve the business climate and create jobs. The government’s costly giveaways will spur growth for only a quarter or two, and risk creating adverse incentives. I’d prefer to see an emphasis on reforms that reduce the need for handouts in the first place and on upskilling the labor force and creating better jobs — measures that would stoke growth for years.”
— Tamara Mast Henderson, economist
While Paetongtarn is set to continue most of the policy initiatives introduced by Srettha, it also borrows heavily from an economic roadmap presented by her father, Thaksin Shinawatra, last month.
As Thailand’s youngest prime minister starts her term, she will need to reassure foreign investors that she can provide a stable administration, eschew any clashes with the central bank, and drive policies to sustain the economic recovery.
“The government very well know all the problems facing the country. The more important thing is to spell out how they will address them,” said Kirida. “We have seen mainly short-term measures. What we now want to see is how they plan to do over the medium and long term.”
(Updates with details in second paragraph.)
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