On November 20, Thailand’s Prime Minister Srettha Thavisin expressed concern over the significantly slower-than-anticipated growth in the third quarter. The economy grew by just 1.5 percent for the July-September quarter, the National Economic and Social Development Council (NESDC) reported last week, compared to the 2.4 percent predicted by economists, the second consecutive quarter of easing growth.
The NESDC cited contractions in government expenditure, exports, and imports in both the agricultural and non-agricultural sectors. Particularly noteworthy was the 2.8 percent decline in the industrial sector over two consecutive quarters. While private consumption expanded by 8.1 percent in Q3, a 3.1 percent fall in exports contributed to the economic challenges. The services sector, fueled by increased foreign tourist activity, showed significant growth of 23.1 percent.
NESDC’s downward revision of the growth forecast for 2023 to 2.5 percent, at the lower end of the initial range, raises concerns about the nation’s economic trajectory and suggests a potentially slower-than-expected recovery from the recession of the COVID-19 pandemic. It also casts into doubt Prime Minister Srettha Thavisin’s ambitious goal of achieving 5 percent growth over its four-year term. Srettha, who assumed office in late August, faces challenges in realizing this vision, particularly due to his flagship digital wallet policy, which aims to infuse 500 billion baht into the economy via 10,000-baht ($285) handouts to nearly every Thai citizen.
While the NESDC’s economic projection for 2024 does not factor in the anticipated impact of the digital wallet stimulus, this is far from certain to happen. Specifically, there are complexities regarding its compliance with Article 53 of the Financial Discipline Act, which stipulates that the use of funds not in accordance with the normal budget can only be done in cases of urgent necessity. and opposition politicians have expressed concern about the debt necessary to fund the massive stimulus. Uncertainty surrounding the digital wallet stimulus adds complexity to Thailand’s economic recovery.
On the political front, doubts regarding the sustainability of Srettha’s premiership continue to cast a shadow over Thailand’s future. Skepticism surrounding Srettha Thavisin’s longevity stems from doubts about his ability to navigate the country’s mounting economic challenges effectively. Srettha’s populist measures, particularly his stimulus plan, involve significant government spending and there is a fear that relying solely on such short-term populist policies, without accompanying structural reforms, may result in unsustainable levels of public debt. Policies that aim to appeal to the general public, often through direct financial assistance, may not necessarily address deeper economic challenges or contribute to long-term fiscal stability.
Analysts have expressed apprehension about the impact of tightening monetary policies, with the Bank of Thailand announcing consecutive interest rate hikes in a bid to rein in inflation and stabilize the Thai baht.
While Thailand’s economic challenges are formidable, the potential for political instability adds an extra layer of uncertainty. Srettha was only appointed prime minister after a protracted political deadlock following the general election in May, during which his Pheu Thai Party joined forces with its former foes in the military, after the progressive Move Forward Party, which won the most seats in the election, was blocked from forming government by the military-appointed Senate. For now, it remains clear how much power Srettha commands within the sprawling ruling coalition, while his party’s pact with military-backed parties has the potential to deepen popular discontent, among supporters of both Pheu Thai and the MFP, about the state of Thai politics.
Thailand has a history of political turbulence, and the addition of economic uncertainties could amplify the risks. Doubts surrounding Thavisin’s ability to weather the economic storm, coupled with delays in crucial policy implementations, create an environment ripe for discontent. In a nation where political stability has often been elusive, the economic downturn could be a catalyst for renewed political unrest.
The specter of political instability becomes more pronounced when considering the broader regional context. Some of Thailand’s neighbors are making strides in economic development and political stability, highlighting the urgency with which Thailand needs to address its internal challenges. The risk of losing ground to regional counterparts in terms of economic progress and political cohesion is a real concern that necessitates decisive and effective leadership.
In a nutshell, Thailand stands at a critical juncture, facing a convergence of economic challenges and political uncertainties. Slowing growth, coupled with weak public spending, declining exports, and uncertainties in monetary policies, has created a challenging economic landscape. Doubts surrounding Srettha Thavisin’s ability to navigate these challenges, compounded by delays in crucial policy implementations, raise concerns about the nation’s political stability. The government must instill confidence in its ability to address both economic and political fronts effectively.