Amid the murky global economic backdrop and the country's underperforming economy, the Prayut Chan-o-cha government is pressing on with its three-pronged stimulus strategy aimed at not only shoring up domestic demand and economic growth, but also delivering sustainable growth in the long run.
Thailand is experiencing the perfect storm of economic headaches.
Exports, the decade-long growth driver, have fallen for several years as the country has lost its competitive edge and the spluttering global economy has sapped demand. Meanwhile, domestic consumption has been dented by high household debt, low incremental income and soft farm prices, while private investment has continued to decline since the devastating floods in 2011.
Public investment and tourism are the only major bright spots.
Even though economic growth rose to 2.8% in 2015 and 3.3% for the first nine months of 2016, up from 0.8% in 2014, such growth remains subpar. The current government has launched rapid-fire short- and long-term economic stimulus measures to jolt the country's economy out of the doldrums.
The three-pronged approach combines fiscal expansion through state investment, providing financial liquidity to hard-hit farmers, low-income earners and small and medium-sized enterprises (SMEs), domestic consumption stimulus and structural reform to sharpen the country's competitive edge and facilitate Thailand 4.0 to kick-start much-needed private investment.
The wave of stimulus covers short-, medium- and long-term plans.
Fiscal stimulus
Since Gen Prayut took the helm in 2014, the government has never narrowed budget deficits; state spending has been the mainstay of economic growth in recent years. Other economic engines, meanwhile, have remained sluggish.
The government ran a budget deficit of 250 billion baht for fiscal 2015, unchanged from the previous year, before widening the budget deficit to 390 billion for fiscal 2016. It is maintaining a budget deficit of 390 billion baht for fiscal 2017.
The expansionary budget focuses on big-ticket infrastructure investment. The government plans to invest in 20 large-scale infrastructure projects, most of which involve rail transport, with a combined value of 1.41 trillion baht through 2022.
The state is pinning hopes on megaproject investment as a trigger point for the private sector to invest -- the so-called crowding-in effect -- to sharpen the country's competitiveness and boost economic growth to its full capacity of 4-5%.
The Fiscal Policy Office (FPO) plans a balanced budget in the next eight years, delayed from fiscal 2017, after running a deficit for almost 20 years. The Finance Ministry's think tank cited liabilities for hefty spending on infrastructure development and losses from the Yingluck Shinawatra government's rice-pledging scheme for running budget deficits for an extended time.
The cabinet recently approved a hefty 190-billion-baht mid-year budget, almost doubling the previous plan of 100 billion. Some 100 billion baht will be set aside for the development of 18 provincial clusters, with the rest going towards Village Fund development worth 500,000 baht per village.
Each provincial cluster will be earmarked in a range of 5-60 billion baht, compared with 400-500 million in the past, to sharpen the country's competitive edge.
Liquidity injection
The government has periodically launched stimulus measures to put money into the pockets of farmers, those who are at the bottom rung of the economic ladder and SMEs, as these groups have been hit by tumbling agricultural prices, high household debt and the uneven economic recovery.
The cash injection is considered a pump-priming tool to help vulnerable groups get through a bout of economic difficulty before state investment and structural reforms strengthen the economy.
Under a raft of measures launched recently, the government offered funding of 1 million baht each for 59,000 villages rated Grades A and B, featuring interest-free soft loans for the first two years and a mere 1% plus financing costs for the subsequent 3-7 years. Moreover, the government has allocated an additional 35 billion baht to inject 500,000 into each of the 70,000 villages nationwide to boost the rural economy.
The state has earmarked 5 million baht for each of the 7,255 tambons for local development and has provided 100 billion in soft loans to SMEs. Government Savings Bank (GSB) has extended soft loans to commercial and state-run banks at 0.1% interest, after which the banks then re-lend the money to SME operators at a 4% rate.
In line with the latest measures, the government gave cash handouts worth 19 billion baht to almost 7 million people who qualified for a one-off cash giveaway and signed up through the national e-payment system.
Under the scheme, those earning up to 30,000 baht a year are entitled to 3,000 baht per person, while those earning more than 30,000 but less than 100,000 a year are entitled to 1,500.
For the 6.97 million people who qualified, 3.23 million earn up to 30,000 baht a year and the rest earn more than 30,000 but less than 100,000.
GSB, GH Bank and the Bank for Agriculture and Agricultural Cooperatives will offer the 7-billion-baht cashback scheme in 2017 to millions of borrowers who have good payment histories -- almost all of whom are low-income earners.
To spur weak domestic consumption, the government unveiled year-end shopping tax breaks worth up to 15,000 baht during the holiday season for individual taxpayers.
Structural reform
The lengthy period of dismal investment from the private sector has undermined the competitiveness of the Thai economy and led to subpar growth. In the past decade, private-sector investment fell to a low of 2% of GDP in 2014, versus 14% on average in the preceding decades.
The government has prodded the private sector to invest by launching incentives, noting that they should start investing before interest rates reverse to an upward cycle soon.
To create an investment-friendly environment and attract foreign direct investment, the government is addressing 10 areas -- including getting electricity for a business, tax payments, starting a business, dealing with construction permits and registering property -- that need to be improved to make it easier to do business in Thailand. The goal is to make the country one of the top 30 business-friendly destinations in 2017, having seriously reduced red tape since 2015.
Thailand's ranking in the World Bank's Ease of Doing Business report for 2017, which surveyed 190 countries, climbed to 46th from 49th in the previous year. Thailand, according to the same report, ranks ninth in Asia and trails only Singapore and Malaysia in Asean.
Finance Minister Apisak Tantivorawong has said that the government and state enterprises will ramp up spending if private-sector investment remains subdued.
With a clear-cut goal to stimulate investment in 2017, the government has asked state enterprises to front-load their investment in projects originally scheduled for the next two years.
Finance permanent secretary Somchai Sujjapongse said recently that the government was considering a bunch of new and hard-to-deny investment packages to tempt the private sector to kick-start investment.
The FPO has estimated that private investment will expand by 1.6% in 2016, well above the 1% and 2% contractions in 2014 and 2015, respectively, but it remains inadequate to bolster economic growth.
The government has further flagged 10 targeted sectors as part of the government's ambition to push Thai industry into Thailand 4.0 or a value-based economy.
The 10 sectors are automotive and auto parts, including electric vehicles; smart electronics; affluent, medical and wellness tourism; agriculture and biotechnology; food; robotics for industry; logistics and aviation; biofuels and biochemicals; digital; and medical services.