Paetongtarn Shinawatra, Thailand’s new Prime Minister, begins cabinet talks while briefing herself into the role. All eyes are on her choice as Finance Minister and the government’s economic policies. As business leaders await answers, there are signals that Thailand may reach 3% growth this year, defying earlier expectations.
Monday saw newly appointed Prime Minister Paetongtarn Shinawatra or Ung Ing learning the ropes. In short, she held meetings with former Prime Minister Srettha Thavisin and key officials, including the Secretary-General of the Board of Investment (BOI), Mr. Narit Therdsteerasukdi. Later, speaking with reporters, she was coy about giving anything away regarding the cabinet lineup. She urged reporters to wait until it was all agreed. However, the focus is on who will be the new Finance Minister and practical economic stimulus plans.
This comes with some encouraging economic data and signs that practical plans put in place by the incumbent acting Deputy Prime Minister Pichai Chunhavajira may be bearing fruit. In short, Thailand is still on track to reach 3% growth this year, defying expectations.
As newly appointed Prime Minister Paetongtarn Shinawatra got down to meeting with key officials on Monday, there was some good news on the economy.
In short, figures released by the National Economic and Social Development Council (NESDC) show that growth in the second quarter was 2.3%. This followed a 1.6% expansion in the opening three months of the year.
Tourism, exports, and strong private consumption are buoying the Thai economy amid slow budget dispersal
A briefing was given by Danucha Pichayanan, the Secretary-General of the government’s economics agency. Private consumption surprised analysts. Despite a heavy private sector debt level, it defied expectations by expanding by 4%.
Meanwhile, the economy has been buoyed by foreign tourism activity, with numbers reported to mid-August up by 33%. In short, Thailand is currently welcoming 3 million visitors a month.
At the same time, exports for the three months were also strong. Goods dispatched were up by 1.9% while service exports expanded by 19.8%.
The agency noted that in the first half of 2023, the government’s budget dispersal was significantly off target. Indeed, investment overall contracted by 6.2%.
Last week also saw some good news from the Federation of Thai Industries (FTI), which reported a lift in the industrial index for July 2024. The FTI revealed that the index rose for the first time in four months. In June, the index closed at 87.2 and ended in July at 89.3.
Thai industry index rises as business leaders warn government of Chinese dumping crisis impacting GDP
Certainly, it is not clear whether this is a short-term boost.
Industry leaders have already warned the government that up to 30 different sectors of the economy are being severely impacted by Chinese dumping into the Thai market.
Undoubtedly, this is causing factory closures and the loss of employment.
Business wants the government to get tougher with China as dumping expands, wiping out Thai firms
Most business executives see GDP growth of less than 2% in 2024 as ministers meet without the PM
As Prime Minister Paetongtarn Shinawatra chooses her cabinet, the appointment of a strong economic team is critical. On Monday, Ms. Paetongtarn was giving nothing away. She urged reporters to wait until the cabinet is announced in its entirety. Indeed, there are indications that the Prime Minister wants to see a greater shakeup, with reports that the Pheu Thai Party would like to receive back the Energy and Interior ministries.
Both are contentious, but particularly the latter, as Bhumjaithai Party leader and Deputy Prime Minister Anutin Charnvirakul has insisted that everything remain unchanged concerning his party’s quota and portfolios.
In the meantime, the economic and finance team is within Pheu Thai’s stewardship.
Some business leaders have been impressed by the stewardship of Minister of Finance Pichai Chunhavajira and the team appointed at the end of April. At the same time, the economy remains a challenging prospect.
For instance, unemployment has risen in Thailand to 2%, while factory utilisation at the end of June was only 58.41%
Significantly, a recent survey by the Federation of Thai Industries (FTI) showed most executives projecting GDP growth in 2024 at less than 2%. However, the latest data show there is a real chance of a more positive outcome than that this year.
The rise of Paetongtarn Shinawatra as Prime Minister has industry leaders hopeful for economic stability
All this is occurring after the dismissal of Prime Minister Srettha Thavisin and the rapid installation of Paetongtarn Shinawatra as Thailand’s 31st Prime Minister.
Over the weekend, Mr. Sanan Angubolkul, the Chairman of the Thai Chamber of Commerce, welcomed Ms. Paetongtarn’s appointment. He dismissed speculation linking the Shinawatra family with political unrest and instability. In contrast, he said he welcomed the 37-year-old leader from a younger generation.
However, he urged her to finalise the Cabinet as quickly as possible. It is understood that Ms. Paetongtarn will make a policy statement to parliament in early September.
Mr. Sanan, along with other industry leaders, has been supportive of the ฿450 billion Digital Wallet initiative by Srettha Thavisin. However, on Friday, the business leader indicated that supporting the least well-off at this time should be the priority. This comes with reports suggesting that the Digital Wallet may be replaced by a simpler and more targeted economic stimulus package. In effect, the new government and the Prime Minister wish to avoid any further missteps.
Prime Minister Paetongtarn works to finalise cabinet amid ongoing discussions on Economic Stimulus plans
On Monday morning at the Shinawatra Building in Bangkok, Ms. Paetongtarn met with Mr. Srettha to discuss the current issues facing the government.
Also at the meeting was Mr. Narit Therdsteerasukdi, the Secretary-General of the Board of Investment (BOI). In the meantime, more encouraging data from the Ministry of Commerce last week showed real foreign direct investment in the kingdom at ฿81.487 billion for the first six months of the year.
In contrast, the confirmed figure for 2023 was $2.969 billion or ฿105.39 billion for the whole year.
To illustrate the government’s problem, this level of investment is significantly below Indonesia, Malaysia, and Vietnam. The figures for these countries last year were $21.7 billion, $18.6 billion, and $8.255 billion, respectively.
Looking at it another way, in 2013, foreign investment in Thailand was 6.3% of GDP. However, last year that figure was only 2.8%.
Thailand struggles to match foreign investment levels of neighbouring countries amid global competition
Amidst the transition to a new government, there are currently reports that Deputy Prime Minister Pichai Chunhavajira may not be in the new Cabinet.
Certainly, this would be a loss. Undoubtedly, the 76-year-old minister is seen as having steadied the ship since taking up office in April. In particular, Mr. Pichai set a plan for the economy to achieve over 3% growth this year.
In short, this was to be achieved by stronger foreign investment, a boost in foreign tourism numbers from 35 to 38 million, and more effective disbursement of the 2024 budget. Previously, it was considered that only 75% of this would be disbursed this year.
In recent months, Ms. Patricia Mongkhonvanit, the Director-General of the Comptroller General’s Department, has been pushing to raise the budget disbursement level.
Last week, she reported that 78.68% of the ฿3.48 trillion 2024 budget had already been dispersed. In effect, that is ฿2.758 trillion. However, that was still only 44.96% of the investment budget.
Therefore, the top official has urged action and flexibility from all departments. This drive runs up until September 30 aiming to get investment projects underway to stimulate the economy.
New government faces challenges in raising budget disbursement to stimulate economic growth by year-end
At this time, Thailand’s business sector wants to see who will emerge as Minister of Finance in the new government. Over the weekend, the name suggested was Deputy Finance Minister Julapun Amornvivat.
After that, the key decision is how economic stimulus will be delivered. Undeniably, it is required; the question is whether the Digital Wallet is the way to go.
On Sunday, Ms. Paetongtarn suggested that while the Digital Wallet was a well-researched plan last year. Nonetheless, she further explained that economic circumstances and the state of the economy had changed.
All eyes will therefore be on the new Prime Minister’s policy statement to parliament in September and, in the meantime, who takes charge of the Finance Ministry.
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