Thailand’s biggest economic challenge is that its economy has been growing at slower pace, about 3% per annum, than Malaysia and China, at about 5% annually, because it lacks the ability to attract foreign investors, according to Dr. Kobsak Pootrakool, executive vice president of the Bangkok Bank and a respected economist, in an exclusive interview with Thai PBS.
If the slow growth persists much longer, Thailand will lose the status of being the economic leader in the region, which would be a big problem, but not an economic crisis like the “tom yum kung” debacle in 1997, he said.
Foreign investment in Thailand today is much less than before the 1997 crisis, due to excessive red tape, which many investors find to be an obstacle to investment and, more importantly, Thailand has fewer free trade agreements than its neighbours, like Vietnam.
He said Thailand used to be the leader in Southeast Asia in the production of electronics but, today, it has lost that status to Vietnam and we are being left far behind.
The cutting of policy rates by the Bank of Thailand is not going to improve the Thai economy, although it may help the economy slightly. If the economy is to grow by 4.5% annually every year, it must be boosted by investment, production restructuring, new innovations and tourism expansion, said the economist.
Dr. Kobsak Pootrakool
As the global economy is predicted to recover next year, he foresees export growth for Thailand, increased foreign investment and an improvement in the Thai economy.
Kobsak said there is no sign of deflation, a concern for many, noting that Thai people are still spending, as reflected in the consumer confidence index.
Regarding the government’s “digital wallet” scheme, under which every Thai who is over 16 will be given 10,000 baht in digital money to be spent in six months, Kobsak said that many previous governments have had similar populist policies. The Abhisit government gave 2,000 baht handouts and the Prayut administration gave 500 baht through the welfare card program.
The current problem is that the exchequer does not have the 500 billion baht to fund the digital wallet scheme and “cannot produce the money out of this air”, said the economist, as he recommended that the government downsizes the scheme to about 300 or 350 billion baht, which could be funded from the annual budget, without the need to borrow and would face less opposition.
Kobsak is of the opinion that Thailand’s economy has not yet reached a critical point and it is definitely not like the economic crisis in 1997, adding that a similar crisis will not happen again because commercial banks have been restrictive and cautious in their lending and investments are much less than the years before the 1997 economic collapse.
As for this year, he said that Thailand, like many other countries, has been affected by the Middle East conflict, which has also affected the global economy, leading to high inflation in several democracies, forcing their central banks to impose interest based policies to arrest runaway inflation.
He said that the global economy will recover gradually, as will Thailand, where growth is predicted to be 2.5-3%.
