Three months of uncertainty and anxiety for Thailand’s economy and the business sector ended last week as Parliament finally elected the country’s 30th prime minister after the May 14 general election.
The election of Srettha Thavisin, coalition leader Pheu Thai Party’s prime minister candidate, on August 22 has come as a relief to business leaders, injecting optimism into the economy.
The election of the PM paves the way for government formation.
Sanan Angubolkul, chairman of the Thailand Chamber of Commerce, said many concerned parties wanted the new government to be formed quickly so it could start addressing economic issues. He said the government in the first 100 days in office should move fast to address the high cost of living, promote tourism, accelerate government spending and formulate an expenditure plan for fiscal 2024.
Supachoke Supabundit, president of Kiatnakin Phatra Securities, said it was good news that “we finally have a new prime minister”.
Chanpen Sirithanarattanakul, head of research at DBS Vickers Securities, said some investors were worried about big potential street protests in Bangkok so they did not want to come for the “Thailand Focus 2023” conference, while some had registered to attend almost at the last minute.
The two analysts shared their views at the annual conference, an event aimed at promoting foreign direct investment, investment in listed companies and business partnerships with local companies, hosted by the Stock Exchange of Thailand (SET) from August 23-25.
Importance of good governance
Pheu Thai’s decision to form a government that includes members of the outgoing government, such as United Thai Nation Party, Palang Pracharath and Bhumjaithai, has dented its popularity. The party has been accused of breaking its social contract with voters during the election campaign when it had promised it would not join forces with the three key parties seen as pro-military.
Ostensibly hinting at Pheu Thai, SET chairman Prasarn Trairatvorakul said the new government had started by breaking its election pledge, but he hoped that in the future “they improve good governance, a key element to boosting confidence”.
At odds with the central bank?
Many critics noted that some of the new government’s policies contradict the Bank of Thailand (BOT)’s monetary policy. They refer, especially, to the party’s promise to give every Thai aged over 16 a sum of 10,000 baht through a digital wallet. The 560-billion-baht scheme is aimed at boosting economic growth by increasing spending power.
BOT governor Sethaput Suthiwartnarueput prefers policies that will maintain economic stability rather than jumpstart economic growth.
Prasarn, however, added that the BOT was also concerned about slowing economic growth.
The SET Index has welcomed recent developments after being sluggish for many weeks, but stock analysts warn that investors are likely to watch the government’s economic policies and who are the new ministers.
Slowing growth
Thailand’s economic growth in the second quarter of the year decelerated to 1.8 per cent, from 2.6 per cent in the first quarter, according to the National Economic and Social Development Council.
The key drivers of the economy were domestic consumption and recovery of tourism, while most other sectors were in negative territory.
Private consumption expanded 7.8 per cent and the number of foreign tourists rose to 6.4 million, jumping 306.8 per cent year on year. However, private investment expanded just 1 per cent, and public investment dropped by 1.1 per cent.
Export of goods was down 5.7 per cent as demand in the global markets declined.
The latest data has disappointed the market, as exports in dollar terms in July contracted by 6.2 per cent while exports in the first seven months of the year dropped by 5.5 per cent year on year.
Srettha to promote tourism
Newly appointed prime minister Srettha recently went to Suvarnabhumi Airport in Bangkok to see with his own eyes what was happening at the most important gateway to the country. He also went to Phuket and Phang Nga, two popular resort provinces, to gather information from local entrepreneurs and people in the tourism industry.
Cautiously optimistic
Kobsak Pootrakool, chairman of the Federation of Thai Capital Market Organizations, was optimistic about the economic outlook under Srettha’s leadership. “I really believe in the Thai economy and we will be able to manage it,” Kobsak, who is also a senior executive vice president at Bangkok Bank, told foreign investors at the Thailand Focus conference.
He said the impact of the global slowdown on Thailand’s exports was minimal compared to other countries.
“The new PM comes from the private sector, and he is coming at the right time. Srettha will take Thailand to another level,” Kobsak said.
Srettha was chief executive and president of property giant Sansiri Pcl before entering politics.
It is early to give advice as they are still forming the government, but the capital market wants to work with the government in four key areas needing policy support, according to Kobsak.
First is the advancement of technology. In order to prosper, the country has to tackle technological challenges.
“We currently have soft power in tourism, but it is not enough,” said Kobsak. “The country must embrace the digital revolution and industrial 4.0. Thailand must become a hub of professionals from around the world as it lacks a talented workforce. We can open the country to attract professionals in 2-3 years instead of taking 30 years to create them,” he said.
“We have a limited number of unicorns [a startup company valued at least US$1 billion], so why don’t we invite or import those startups,” he suggested. The country could further support foreign firms to establish regional headquarters by creating a good environment.
Secondly, our industries have to move up the industry supply chain, for example by developing the electric vehicle industry and high value-added medical tourism. The country may need to promote intermediate S-Curve industries, as new S-Curve sectors, such as robotics, are hard to achieve, he said.
Thirdly, the government should support Thai firms to invest abroad and become a regional player, such as through more investments in Indonesia.
Finally, the country must create the right environment by improving infrastructure. The government has to support the Eastern Economic Corridor, as it is important to attract foreign direct investment, he noted.
Thailand also would need to develop other projects in the Andaman Sea, as a western gateway. A deep sea port should be built in order to facilitate trade with India, Bangladesh and African countries. The new government has to work on more free trade agreements (FTAs), to keep up with Vietnam. Pheu Thai has a reputation of pushing many FTAs in the past, and it should do so again, he said.
Kobsak also called for simplification of rules and regulations and implementing a regulatory guillotine.
By Thai PBS World’s Business Desk
