FRIDAY, March 29, 2024
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Economists stress need for investment to boost GDP

Economists stress need for investment to boost GDP

Investment is needed to boost gross domestic product (GDP) by more than 3 per cent in the coming years, economists have been stressing.

"How are we supposed to grow if our public and private sectors do not invest?" said Ekniti Nitithanprapas, deputy director-general of the Fiscal Policy Office.

It would be difficult to see the 4-per-cent-plus pace that Thais enjoyed 10-15 years ago, as combined public and private investment has dropped from more than 40 per cent of GDP before the 1997 crisis to the current 21-22 per cent, he said.

Private investment has fallen from more than 30 per cent pre-crisis to about 20 per cent now, while public investment plunged from more than 10 per cent to less than 5 per cent.

"If we had not built

Suvarnabhumi Airport 10 years ago, we would be in even deeper trouble now since there is no way that the old Don Muang Airport would be able to accommodate the 28 million-29 million inbound tourists, which led to the 25-per-cent expansion in the tourism industry that we are enjoying right now," he told an economic seminar arranged by the National Legislative Assembly earlier this month.

Improvement of education is also imperative to enhance the effectiveness of the workforce while incentives are required to kick-start the migration of workers from the agricultural sector.

"About 67 per cent of our 39 million workers have only graduated from the Matthayom 3 (lower secondary) level and most of them are working in the wrong place, as one-third are in the agriculture sector, which only contributes to 7.9 per cent of GDP, while other sectors such as manufacturing and services cannot effectively expand because of the shortage of workers in their fields," he said.

Veerathai Santiprabhob, who becomes the next governor of the Bank of Thailand in October, said the government’s effectiveness has to be improved, especially the investment performance of state-owned enterprises, in order to lower the public’s cost of investment and increase the competitiveness of the private sector.

"The effectiveness of the government is imperative since they are the ones that are using most of the country’s resources and they are the ones that control the regulations that dictate how other people can use the country’s resources," he said.

The bureaucracy has grown by 50 per cent over the past 10 years while the 7-per-cent ratio of officials’ wages and pensions to GDP means that the budget has tripled in the same period.

The ratio is the highest in Asia but the effectiveness of the government has dropped as manifested by the government’s agencies’ failures to comply with international standards.

The country’s aviation oversight flunked the International Civil Aviation Organisation’s test and the fishing industry relies on illegal, unreported and unregulated labour.

"In terms of real investment, Thailand is the only country in the region that is still unable to get back to the same level that we were capable of before the Asian financial crisis of 1997," he said.

"Only three manufacturing industries – telecommunication, renewable energy and logistics – have made any real investment since the crisis, while most of the foreign direct investments that have increased are going into the service sector, not manufacturing, meaning that the expansion of the production base is very limited" he added.

Nalin Chatchotitham, economist with HSBC Thailand, said separately that the 8-per-cent year-on-year contraction of manufacturing production in June, which was the fourth straight month of decline, surprised the market on the downside.

This reflected both softness in export orders and poor domestic demand for durable goods.

"While the recent weakness of the Thai baht is expected to ameliorate the weak performance of exports, the impact on new orders may become more visible only in the fourth quarter, as it takes time for businesses to consider prices and orders.

Although the baht depreciated rapidly in recent weeks, its year-to-date performance is not too far off from its regional peers.

Given the sluggish recovery of both external and domestic demand, the central bank is expected to lower its policy rate to 1.25 per cent, probably as soon as this quarter, to provide more support for the economy.

"Nevertheless, timely execution of public investment will be instrumental in ensuring the continuity of the economic recovery, especially as the severe drought is threatening to dampen private sentiment further," she added.

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