Efficient fiscal policy is needed to recover the economy in the rest of the year amid a lower space of both fiscal and monetary policies, warns Standard Chartered Bank (Thai).
Tim Leelahaphan, economist at Standard Chartered Bank (Thai), said the government has the remaining stimulus budget at around 20% of the total one trillion baht borrowing under the emergency decree.
As a result, the remaining budget should be used for efficient stimulus measures to build up people's confidence, stimulate economic activity and support the country's economic growth.
According to Mr Tim, Thailand's public debt ratio has increased to around 50% of GDP now from around 40% last year.
Meanwhile, the household debt ratio has grown to above 80%, while domestic consumption, which contributes around 50% to GDP, has recorded a low rate of growth.
"Despite the government's several stimulus measures introduced over the past year and rising public and household debt ratios, domestic consumption and the economy have yet to show significant signs of recovery," he said.
On a year-on-year basis, the research house expects the economy will further contract in the first quarter from last year's fourth quarter. However, it would show a growth rate in the second quarter mainly due to the low-base effect.
The research house is maintaining its economic growth forecast at 2.6% this year.
Mr Tim said the public debt ratio is likely to increase to the ceiling rate of 60% at the end of next year, while the government has yet to give any signs of raising the ceiling rate. As a result, there is no more room to create public debt, he said.
At the same time, Mr Tim said the Bank of Thailand (BoT) has no more space to cut its policy rate. Standard Chartered Bank (Thai) predicts the central bank will maintain its policy rate at the existing level of 0.5% until 2023.
Meanwhile, policy rates worldwide are in rising sign in accordance with global economic recovery.
"Given uneven global economic recovery, it would lead to greater uncertainties, especially post-Covid-19. So, the government needs to prepare enough and efficient stimulus packages to handle higher volatile situations otherwise it would have no methods to support economic recovery," he said.
Uncertainties include the new round of the virus spread, limited vaccinations, the US-China trade dispute, a volatile capital market and local political risk. However, the research house said the third round of the virus came as no surprise, pointing out that the outbreak comes under its existing assumptions.