Higher public debt OK if invested in growth segments, EIC says

 

The EIC raised the point of how to maximise state borrowing to add value to the country after the government raised the debt ceiling to 60 per cent of gross domestic product from 48 per cent currently.

Sutapa Amornvivat, chief economist at the EIC, said the paradigm of global economic growth had changed because developed countries that used to be the champions had become slower moving.

Sutapa will share the outlook of Siam Commercial Bank’s analysis arm on the global and Thai economies and key engines of Thailand’s growth at an EIC forum on June 8.

She said the global economy was facing struggles from the arrival of new technology that is replacing labour, so even if the economy rebounds in the future, employment might not return. Moreover, ageing populations are having an impact on the labour market and the so-called gig economy of temporary employment was reducing the demand for investment.

The gig economy is an interesting phenomenon because consumers are willing to share services, reducing the need for business operators to invest much, she said, referring to Airbnb and Uber as examples.

With the new paradigm, former economic champions are not reborn, she said.

Thailand is likely to use the fiscal budget as the tool to drive the economy because of the low public debt, but the government should focus on investing in growth segments. In the EIC’s view, these are tourism, information and communications technology, and logistics services. 

Tourism in Thailand has grown faster than globally, while the country’s airports perform well for tourists

 “However, despite the healthy growth in tourism, we don’t see official figures on ‘waste management’ relating to tourism. Such waste includes injured tourists, and if Thailand wants to be a tourism destination, we should put emphasis on waste management,” Sutapa said.

The EIC used to do workshops with tourism operators in Phuket, where they expressed concerns about infrastructure and the safety of both tourists and operators themselves, she said.

The government must focus the state budget on growth segments, and it has been proved that even during an economic slowdown, tourism will still be key for Thailand’s growth and the country should look at high returns from this sector, she said.

Meanwhile the global economy is facing a rising number of elderly people. Within a decade, elderly people in China, the United States and the European Union are expected to make up one-third of the global population.

Older tourists require accommodations that are different from young tourists’ needs. Elevators at tourist attractions and public toilets are basic infrastructure that the government can invest in at relatively low cost.

The Thai tourism sector still focuses on marketing to attract travellers more than talking about infrastructure, Sutapa said. 

In the ICT segment, the long delay of third-generation cellular service resulted in lost opportunity for luring digital businesses. Thailand has many application experts but they had to develop apps for 2G while waiting for 3G technology. 

The national e-payment scheme and investment in logistics, whether motorways or regional rail links, are the right way to go, she said. However, the country is still slow to adjust its foreign-investment laws and the railway double-tracking agreement, which reduces the chance of Thailand becoming the centre of the CLMV (Cambodia, Laos, Myanmar and Vietnam) market. A challenge for Thailand is the migration of people from the agricultural to the service sector, as food security is an issue that must be followed.

Urbanisation will pose a problem for food security as well, she said.

The government should hurry up and develop the skills of people who migrate from agriculture into the service sector, she added.