As the controversial newly elected Thai government takes shape, one of the main areas that junta leader-turned-civilian Prime Minister Prayut Chan-o-cha will face is managing the economy, which has been of particular concern. for Southeast Asian State in recent years.
These are not good times for Thailand’s economy. Lightly, a Bangkok Post An August 3 article estimated that Prayut “may have bit more than he can chew” after recently deciding to chair the Council of Economic Ministers.
The data underscores this point. In the second quarter of 2019, the economy grew at the slowest pace (2.8%) in five years, we learned this week. As the Financial Time reported, agricultural production fell by 1.1%, exports by 6.1% and imports by 2.7% in the second quarter, compared to the same period last year. Additionally, the central bank said it would lower its estimate for this year’s economic forecast, which was previously 3.3%.
So what did Prayut do? There are a few things worth noting. On the one hand, on August 6, the cabinet approved a 2020 budget budget of 3.2 trillion baht ($ 103 billion), up 6.7% from the 2019 budget. This is clearly a investment budget. About 20.5% (655 billion baht) will go to state investment, which also accounts for the majority of the 469 billion baht deficit.
This is what deficit economists will be concerned about. Thailand has rarely seen a budget surplus, but Prayut’s budget is more expensive than most. The public debt to GDP ratio is only 42%, which gives the government some flexibility since the ceiling is set at 60%. The government estimates that it can achieve economic growth of between 3 and 4% in 2020, which could cover part of the deficit with an increase in revenues.
It is also worth mentioning, more generally, that in order to have a more balanced budget, the sensible policy might have been to cut defense spending and devote that money to new stimulus work, if the economy was really in good shape. center of attention. But the government again pledged to increase military spending year on year, resulting in a Bangkok Post editorial to state: “The army’s budget is out of control. “
The $ 10 billion stimulus package, more details of which were released this week, includes “aid to more than 900,000 drought-affected farmers, 1,000 baht ($ 30) in donations for tourism-related spending , loans for small businesses and increases in subsidies for state welfare cards, ”AFP reported.
Some might venture to say that what we have here is a discounted version of Thaksinomics – the name given to the policies of former prime ministers Thaksin Shinawatra and his sister, both overthrown in military coups. None of this comes from the blue. In 2015, Prayut hired Thaksin’s economic architect, Somkid Jatusripitak, as an adviser, and from 2016, continued many of the same policies under the junta.
So what is “Prayutnomy” or “Prayutism” one might ask? For now, it looks like economic populism and a boot in the face, at best. And always the boot in the face and a little less money in pocket, if things do not go as planned. Debates over whether Thaksinomics was populist or redistributive – a slight but important distinction – can still take place today, not least because Prayut repeats them. Write in the Asian Nikkei Review in January, William Pesek presented a compelling argument as to why they should be seen as populist. However, it can be argued that Prayut’s policies are more populist in that he looked to them to stay in power rather than to gain power. It is more opportunistic to borrow than to create. However, one cannot separate politics from economics, and that is why Thais should be concerned.
One of the larger questions is what is Prayut’s long-term motive. Is it to turn the economy around and actually improve the lives of ordinary Thais? Is it to ensure that Thais will be richer in 10 or 20 years than they are today? Or is it just power?
For now, we suspect the latter. This is important because it means short-termism – you stay in power by proposing populist policies, and when they fail, you have to turn to something else. Short-termism may also be part of the reason why we have seen Thailand outweigh the benefits of China’s Belt and Road Initiative more than its costs. Prayut’s participation in the second Belt and Road Initiative Forum in May was seen as an important signal that Prayut is now keen to forge closer ties with Beijing. The 20-year national strategy, a project to make Thailand a developed nation by 2037, and which was actually part of the 2017 constitution, largely amounts to securing $ 45 billion in investment for the Eastern Economic Corridor Development Plan – and China has such money.
Certainly, things could turn out well as the new government is taking shape. But considering what we’ve seen so far and what we know about Prayut, it doesn’t look like Prayutnomics will do much for ordinary Thais and solve the country’s problems for years to come.