The Thai economy has rebounded swiftly from political turmoil over the past eight years mainly because of consumer-driven populist policies, says a bank economist.
People check their phones while waiting for the next skytrain in Bangkok. An economist for Tisco predicts the Thai economy will pick up at a slower pace as the government has chosen not to use populist measures. PATTARAPONG CHATPATTARASILL
But the recovery is taking longer this time around as the government decided to take a bitter pill and refrain from populist measures, said Kampon Adireksombat, Tisco Financial Group's chief economist.
He views this as a wise choice because it will not add a significant burden to the budget. The government must decide what kind of economic growth model it will follow, said Mr Kampon, noting it seems to prefer the slow growth model.
The regime has repeated it will not follow the same policies as previous administrations, in particular the ill-conceived rice pledging scheme that unseated Thailand as the world's largest rice exporter and cost taxpayers some 400-500 billion baht. The scheme helped sink the domestic price of rice as massive stockpiles were collected in warehouses, with the government thinking controlling the supply would affect the price.
He said the government might want to consider focusing on raising people's income rather than enhancing job creation because the unemployment rate remains low and is not a priority. The unemployment rate stood at 1% year-on-year in the second quarter, a slight increase from the first quarter's 0.9%, with the average number of unemployed people 385,700, reported the National Economic and Social Development Board (NESDB).
In the first half of 2014, employment declined by 0.8% and the unemployment rate stood at 0.9%.
Although the government has been implementing policies aimed at raising income in the farming sector, they might not be big enough to shore up economic growth, likely leading to more stimulus measures by early next year to jump-start the economy, said Mr Kampon.
The government stimulus policies are like a boxer who only throws jabs without any big uppercuts, he said.
The Bank for Agriculture and Agricultural Cooperatives began making one-off cost-subsidy payments to smallholding rice farmers on Monday following cabinet approval for the payout of 1,000 baht per rai, with a maximum of 15 rai. The government hopes the 40 billion baht in payouts can help stimulate the lacklustre economy.
The government also approved measures to assist rubber farmers, authorising the National Rubber Policy Committee to distribute a one-time cash handout of up to 15,000 baht to around 850,000 rubber farmers across the country. The total cash injection is estimated at 8.5 billion baht.
Mr Kampon projects economic growth of 4-5% next year due to this year's low base effect, but if the double-track rail development projects are delayed, unlike the electric train and subway expansion plans, this could undermine the estimate.
Domestic consumption is expected to pick up next year as swelling household debt, recorded at 10 trillion baht or 83.49% of GDP in the second quarter, is mainly concentrated among low-income groups, he said.
The Bank of Thailand forecasts the economy will grow by 4.8% next year with public spending the key growth driver, while the NESDB predicts growth of 3.5% to 4.5%.
Charl Kengchon, managing director of Kasikorn Research Center, said the two conditions paving the way for growth next year were a substantial capital expenditure for public investment projects and a pickup in exports.