Bangkok: Amidst the dust rising over the formation of a new government, Dr. Somchai Jitsuchon from TDRI analyzed the political scenarios and economic policies to watch. He believes a stable government is likely to be a coalition of 2-3 major parties, such as Bhumjaithai, Pheu Thai, and Kla Tham, which would impact the country's economic policy in several dimensions.
According to Thai News Agency, the short-term economic policies under consideration focus on addressing economic hardship and debt. The three parties share a consensus on policies related to "debt relief" and reducing the burden of "energy." However, Dr. Somchai warns of the potential for moral hazard in debt relief, suggesting that overly lenient measures could encourage increased borrowing. He recommends adopting the Bank of Thailand's approach, which involves behavior modification, education, and incentives to promote financial discipline among borrowers. Additionally, the establishment of a dedicated agency to professionally manage business debt is proposed to alleviate concerns of financial institutions.
In terms of macroeconomic policy, attracting Foreign Direct Investment (FDI) is a priority. Dr. Somchai envisions a perfect "jigsaw puzzle" if Bhumjaithai and Pheu Thai parties form a coalition. The Thailand Fast Pass initiative by the Bhumjaithai Party focuses on streamlining investment procedures, which foreign investors value more than tax incentives. A voucher system to upskill and reskill the workforce is proposed to meet investor needs, potentially boosting investment figures and driving GDP growth.
Structural challenges such as demographic shifts and productivity crises are also highlighted. Dr. Somchai points out that Thailand's declining population has been affecting GDP growth. He suggests a new GDP target, where achieving 3% growth per capita in a declining population scenario would equate to previous 5% growth rates. Upskilling the workforce by 10% could enhance GDP growth by 7% within 2-3 years. Support for lifelong learning, especially for senior citizens, is emphasized to maintain their participation in the labor market.
Good governance and the country's image play a crucial role in long-term investor confidence. Transparency, eliminating gray capital, combating money laundering, and building confidence in the capital market through effective regulation are deemed necessary for sustainable economic growth. While addressing structural issues like education or monopolies is challenging and may risk losing votes, a government with a majority has the opportunity to implement significant changes for Thailand.