Economic agenda: Experts outline the challenges facing the next government

[Special report]

Economic policies are regarded as one of the first factors that people evaluate while voting because of their direct co-relation to their standard of living.

Amid external uncertainties and volatility, as well as an uneven recovery of Thailand's economy, where tourism is expanding but exports are contracting, the newly elected government will face difficulties and challenges in maintaining the country's growth momentum while also making people happy.

Pipat Luengnaruemitchai, chief economist at Kiatnakin Phatra Securities, and Chao Kengchon, managing director at Kasikorn Thai Research Centre, Kasikornbank, both agreed that the country's economic picture following the election would be complicated and challenging.

Pipat sees an uneven recovery this year combined with unpredictable external factors such as geopolitical tensions, banking accountability, high inflation, and a recession.

"In short, I think the recovery of the Thai economy would be uneven, and the key risk would come from the external environment. And if that environment affects tourism numbers, it's going to be a worst-case scenario for the Thai economy," he said. "The economy is still in hot water, while we are seeing lots of uncertainty in the external environment.”

 

Climbing out of a deep hole
By the time the newly elected government takes office, the country's economy may not have recovered to pre-Covid levels, he added.

He described the current situation as Thailand struggling to climb out of a deep hole it had fallen into. While the tourism sector is a big hope, he pointed to uneven growth.

He believes the uneven recovery will be disastrous for not only the service and manufacturing sectors but also for the rich and the poor sections of the population.

Meanwhile, Chao speculated that the economic environment would be highly complex after the election as a result of the political process.

"It really depends on the approval process after the election. The MP election and the approval in Parliament is one thing. The other challenge would be the formation of the Cabinet, and the new government. If the confirmation process takes a long time, it might delay budget disbursement," he explained.

 

However, he remains hopeful that the approval process and the formation of the new government will go smoothly and be completed in a timely manner so that disbursement is not disrupted, interrupted, or delayed.

Both Chao and Pipat agreed that the economic plans and initiatives of each party shared some fundamental similarities. They cautioned that though the policies may be well-intentioned, their impact could be gauged only after they are actually put into action.

 

Fiscally sensible policies

"I think the new government has to make sure that their election promises are fiscally feasible and don’t become financially unviable," said Pipat.

They anticipate articulation of more long-term policies by each party, as Thailand faces three challenges: an ageing population, high household debt, and sustainable growth.

"I think the parties are planning to move in the right direction, but the key challenge would be in the implementation, and how they balance the short-, medium- and longer-term objectives of their policies," Chao said.

He wants the newly elected government to focus more on structural and long-term issues.

Demographic challenge
He pointed out that Thailand was on its way to becoming a super-aged society. The Thai population will reach its peak in a few years and then decline, similar to what has happened in China and other countries. As a result, the labour market will tighten and labour costs will remain high.

Any government must address this issue, he said.

Pipat agreed with Chao. He noted that Thailand was currently dealing with multiple fractures that would require good policies for the country to sustain its growth.

He explained that the ageing demographic was one of the warning signs that Thailand was on a slow-growth trajectory.

With a smaller working-age population, Thailand will find it difficult to accelerate the country's growth.

High household debt
Apart from the ageing population, Pipat and Chao were also concerned about the high household debt, which would worsen when the country becomes a super-aged society.

"Elderly people in Thailand may not have sufficient savings to last the increasing lifespan in the coming years. And that's going to put pressure on their household and their family members to take care of them. This has already happened due to the exceedingly high household debt. The new government, hopefully, should pay attention to the structural problems," Chao said.

Meanwhile, Pipat pointed out that the new government should focus their assistance on vulnerable groups because, due to the uneven nature of the recovery, as those who are particularly vulnerable would have a difficult time benefiting from the economic recovery.

"I think the new government has to make sure that growth is inclusive," he said.

 

Combating climate change
Both economists concurred that, in addition to finding a new engine of growth aside from tourism and exports, which would improve Thailand's competitiveness, the new government must take serious action to combat climate change while also pursuing other sustainable development trends.

"In coming years, we have to deal with these issues more seriously. These issues are going to have more tangible impacts on the way we live. Probably we have to pay higher taxes, just to make things more sustainable. These are issues for the new government to consider not this year or next year but eventually, and they will have to deal with it," Chao said.

Pipat added that Thailand is currently in a situation where caution is required.

According to many research institutes, the country can maintain its moderate growth rate of 3.0-3.6% this year due to the strong recovery in the tourism sector and the return of Chinese tourists.

However, there are more difficult challenges awaiting the newly elected government, particularly medium- and long-term issues, such as demographic trends, household debt, and sustainability.

The May 14 general election will not only determine who will serve as the country's prime minister and who will form the government, but also the future direction of the country.