NESDC issues warning on welfare spending surge

NESDC issues warning on welfare spending surge

The National Economic and Social Development Council (NESDC) has warned the government that the fiscal gap is starting to narrow due to the expansion of the state welfare budget, said secretary-general Danucha Pichayanan.

He said state welfare expenditure had been rising in the recent past. It may be necessary to find control measures, including raising incomes for vulnerable groups to be less dependent on the state welfare card system, as well as increasing the efficiency of tax collection in order to create more fiscal space.

Worawan Plikhamin, deputy secretary-general of the NESDC, summarised the council's article on social budgeting that notes that from 2012 to 2019, the expansion of government revenue was 4% on average, lower than the growth in government expenditure of 7.1%.

Social expenditure increased from 570 billion baht in 2012 to 1 trillion baht in 2023.

The study revealed there are as many as 90 social welfare projects in Thailand, covering infants through to the elderly. Of these, 21 projects were studied by the NESDC, accounting for 93.4% of the total social expenditure budget, which includes both government and non-government budgets.

Mr Danucha said social expenditure increased from 570 billion baht in 2012 to 1 trillion baht in 2023.  (Photo: Chanat Katanyu)

The NESDC provided policy recommendations for improving the social expenditure budget, which includes promoting social protection financed by co-payments, increasing the efficiency of tax collection, and motivating financial security through retirement saving and investment.

The government is looking at increasing the salaries of civil servants as a study regarding a suitable rate carried out by the Civil Service Commission (OCSC) is expected to be completed by the end of this month.

Mr Danucha noted that this pay increase proposal would not have an impact on the fiscal gap as it is a rise only in the salaries of permanent employees, which are currently still lower than the rates found in the private sector.

After the study is completed, the Budget Bureau and the OCSC will discuss the matter before forwarding it to the cabinet this month, Mr Danucha said.

The NESDC has released Thailand's Social Outlook for this year's third quarter.

The number of employed people stood at 40.1 million, marking a 1.3% increase from the corresponding period last year.

The unemployment rate declined to 0.99% of the country's labour force, or 401,000 unemployed people, which is similar to the pre-pandemic level.

Household debt reached 16.07 trillion baht in the second quarter of 2023, marking a 3.6% year-on-year increase. This debt accounted for 90.6% of the country's GDP.

Household debt in the form of non-performing loans (NPLs) accounted for 2.7% of total outstanding loans.

NPLs of motor loans stood at 1.89% of total car loans while special mention loans, defined as a loan overdue between 30 and 90 days, tallied 14.3% in the second quarter of this year.

Borrowers with special attention required are the early working age group, or the Gen Y-Z groups, whose spending behaviour exhibit a "buy now pay later [BNPL]" pattern, exacerbated by both online and offline marketing.

As of 2022, there are an estimated 360 million people worldwide using BNPL services.

By 2027, it is expected that there will be 900 million BNPL users, an increase of 157%.

In 2021, the BNPL market was valued at US$120 billion.

According to the "Thailand Buy Now Pay Later Market Report 2022", the BNPL market was valued at 55-65 billion baht.

Even though 96% of people in the country who use BNPL services have not defaulted on their debt repayments, it is likely to lead to household debt problems in the future.

More than half of millennials with a monthly income of less than 15,000 baht are likely to use BNPL services.

In Thailand, jewellery and clothing are the items most likely to be purchased using BNPL.

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