Pichai unveils roadmap to Thai economic growth of over 3%

Finance Minister Pichai Chunhavajira has laid out plans to boost Thailand’s economic growth to over 3% by restructuring the economy and restoring confidence in the stock market.

Speaking at the "Investment Forum 2024: Exploring Investment Opportunities in a Heated Global Environment" seminar organised by Krungthep Turakij at the Renaissance Bangkok Ratchaprasong Hotel, Pichai emphasised the importance of reviving the Thai stock market, where the SET Index has dropped to a four-year low of around 1,300 points.

A clear economic vision for the future was needed to build trust in the Thai bourse, he said in his keynote speech titled "Thailand Investment Opportunity".

Key measures include revitalising the Vayupak Fund 3 to encourage domestic savings and investment.

Pichai also promised legal amendments that would empower the Securities and Exchange Commission (SEC) to take action against wrongdoers.
"We are still in the phase of building confidence. Therefore, we need to establish fund structures that are widely accepted and trusted. Part of Thailand's issues stem from differing directions and opinions between parties, but hopefully, these will gradually improve, reflecting increased confidence in the Thai capital market," he said.

Aiming for over 3% growth
 
Pichai noted declining economic growth, from double-digits in the 1980s boom to an average of just 0.4% post-Covid-19. Thai economic growth for 2023 was just 1.9%, compared with 3-5% in neighbouring countries.

While the National Economic and Social Development Council (NESDC) forecasts growth of 2.4-2.5% in 2024, Pichai said the consensus is that the economy should grow more robustly given Thailand’s geographical and agricultural strengths. The government was thus aiming for growth close to 3% this year and above 3% after that.
 
Urgent debt resolution
 
Pichai highlighted challenges facing all three pillars of the economy – households, production, and the government.

He noted that household debt now accounts for 90% of GDP, or about 16-17 trillion baht, including mortgages, credit card debt, and consumer loans.

High debt levels reduce consumption and affect the second pillar, production, leading to decreased manufacturing capacity and rising non-performing loans (NPLs) among businesses. Thus, the government must intervene to stimulate consumption and production, Pichai said. Measures for household debt relief include calling on state-owned financial institutions to propose solutions for problematic areas such as housing loans.

"We are currently in talks with state banks to develop proposals, as creditors are best positioned to address these issues. We will focus on specific sectors that are still struggling, such as real estate," Pichai explained.

The Finance Ministry is also exploring how state banks could fulfil social objectives rather than purely generating profits. For example, the Government Savings Bank plans to offer 100 billion baht in soft loans at 0.01% interest through commercial banks to reduce loan interest rates from 7-10% to 3-5%. SMEs will also get help with a 50 billion baht credit guarantee fund from the Small and Medium Enterprise Development Bank of Thailand (SME D Bank).

Efforts are also underway to address pandemic-related debt issues afflicting around 2 million people, with a budget of 7 billion baht to clear bad debt records from the credit bureau.
 
Promoting investment in new technologies
 
Pichai highlighted government actions to attract investors in cutting-edge technologies such as electric vehicles (EVs), semiconductors, data centres, and cloud services. He said these industries were lining up to negotiate with Thailand, and trade agreements would pave the way for exports.

Reducing investment barriers by easing rules around foreigners doing business, owning property and accessing skilled labour and clean energy will also make Thailand a more attractive destination for living and investment, Pichai said.

"Foreigners who have worked in Thailand for 25 years still live in condos but want to buy houses, which is currently not possible,” he noted. “We must address these issues to make our country more attractive for investment. These structural problems require government investment.”
 
Public debt ceiling expandable if economy grows
 
Pichai stated that any decision on lifting the public debt ceiling would depend on economic conditions. Currently, the public debt-to-GDP ratio is about 64% with a policy cap at 70%.

With a government investment plan to spur economic growth, raising the debt ceiling to 75-80% of GDP in line with other countries should not be a concern, he said.

"Presently, the policy is to maintain the public debt ceiling at 70% of GDP. There is no immediate reason to expand it beyond this level. However, theory suggests that expanding the debt ceiling can support economic growth," he said.