A total of 3.48 trillion baht from the 2024 fiscal budget was finally disbursed in this year's second quarter, after delays that began on Oct 1 last year due to political setbacks following the general election held in May 2023.
Amid stagnant economic growth, public expenditure has been regarded as the key factor to help revive subdued private spending and consumption in the country.
All eyes are on the cabinet's movements, especially concerning its key projects such as the digital wallet scheme, as there have been expectations the fresh fiscal budget would be wisely used for effective stimulus measures, particularly given the limited remaining time frame.
ACCELERATING DISBURSEMENT
Patricia Mongkhonvanit, director-general of the Comptroller General's Department, said as of the end of June, the procurement contracts for the fiscal 2024 budget had been completed, representing 57.8% of the total investment budget, or equivalent to contract values tallying 417 billion baht.
Meanwhile, the disbursement of the budget according to the contracts has reached 37% of the total investment expenditure, with 265 billion baht having already been disbursed.
The total investment budget for the government in the fiscal year 2024 amounts to 723 billion baht.
The government aims to disburse at least 70% of the investment budget by the end of this fiscal year, referring to the end of September, as part of efforts to support the economy in 2024.
According to Mrs Patricia, the Finance Ministry has implemented measures to expedite the disbursement of the 2024 fiscal budget.
In the case of single-year investment expenditure, the respective government agencies must expedite the delivery of projects in order to ensure budget disbursement by September.
For multi-year investment projects or new investment projects requiring budget carryover, contracts with the winning private sector bidders must have been signed by May 2024.
Measures to reduce the duration of government procurement processes include shortening the publication period of procurement documents via electronic means. For procurement amounts exceeding 500,000 baht but no more than 100 million baht, documents must be published for a period of at least three days.
For amounts exceeding 100 million baht, documents must be published for a period of at least 20 days, significantly reducing the previous time frame to expedite the bidding process.
Additionally, the Comptroller General's Department has established clearer details regarding the appeals process for government procurement to reduce the number of appeals, which have previously caused delays to government projects.
One the improvements is that appeals related to laws other than the Government Procurement Act or appeals by entities that did not submit bids will be managed more efficiently.
Prime Minister Srettha Thavisin outlined a budget bill tallying 3.75 trillion baht for fiscal 2025, meant to jump-start Thailand's sluggish economy as the House of Representatives began a three-day debate on June 19, 2024. The budget aims to help the economy grow to its full potential, said Mr Srettha. Chanat Katanyu
CALL FOR RESTRICTIONS
Athiphat Muthitacharoen, a lecturer of economics at Chulalongkorn University, expressed concerns regarding the government's economic stimulus measures, particularly the controversial digital wallet scheme.
He warned that without strict spending conditions, a portion of the funds could end up with large-scale businesses and some of it might even "leak abroad".
Instead of allowing citizens who receive the 10,000-baht digital wallet payment to spend any amount they wish per transaction, potentially resulting in a single use of the entire sum, he proposed that the government set a maximum daily spending limit for citizens, such as no more than 500 baht per day.
This would help distribute spending among small local businesses more effectively than having no spending limits, he said.
Moreover, setting a daily spending limit would help reduce potential leakage issues, such as in a situation where funds from the scheme might be spent on imported goods or products with a high level of imported content, which would diminish the effectiveness of the policy, he added.
Nevertheless, Mr Athiphat noted that controlling the spending of funds from the scheme on goods with a high import content is quite a challenging issue due to Thailand's economic structure, which relies heavily on imports, accounting for up to 50% of the country's GDP.
Mr Athiphat pointed out that it's easy to purchase imported cheese in any convenience store. The digital wallet project does not prohibit people from spending their money in convenience stores, but if a daily spending limit were to be imposed, it could at least help control the purchase of expensive imported goods to some extent, he said.
Nonarit Bisonyabut, senior economic researcher at the Thailand Development Research Institute, said he would like to see the government initiate multiple smaller projects, each worth 20-30 billion baht, such as providing aid to the poor via the state welfare card or via co-pay projects to help with the living expenses of ordinary citizens, rather than use a large-scale economic stimulus project such as the digital wallet scheme.
"In any case, the government's digital wallet project will play a key role in supporting the Thai economy. As the global economy begins to recover without the predicted economic crises and with the easing of monetary policies in developed countries, many European countries have started to implement interest rate cuts, and the US is expected to follow suit soon. This should positively impact the Thai economy," said Mr Nonarit.
A LONG WAIT
Thienprasit Chaiyapatranun, president of the Thai Hotels Association, said the disbursement of fiscal 2024 budget might not fully boost the tourism industry as anticipated.
He said stimulus schemes such as a tax reduction for individual trips to second-tier cities would not result in leisure travellers making a decision more quickly to book a trip as the actual tax deduction would not occur until the tax filing period early next year, which is a long way off.
Mr Thienprasit said this initiative is different from previous stimulus schemes such as We Travel Together, which was set up so the government immediately subsidised the cost of accommodation, accounting for 40% of the total, encouraging people to snap up deals to save on their travel expenses.
"The issue now is that people don't have deep pockets for travel," he said.
The government should consider reviving this idea by forging a similar subsidy programme that specifically focuses on second-tier cities or properties defined as three-star hotels or below, which were not able to recover as strongly as luxury hotels, Mr Thienprasit said.
As many kinds of accommodation, particularly small hotels and homestay properties, haven't been enrolled in the e-tax system as they require more time to register properly, the current schemes are limited to a certain number of operators, he noted.
Referring to the tax reduction for corporate meetings, Mr Thienprasit said the association needs more time to evaluate the outcome.
During the limited period covered by the fiscal 2024 budget disbursal so far, the government organised many festivals and events to quickly woo tourists, he said. However, this would only boost tourism over the short term, while focusing too much on festivals is unsustainable for the industry, he added.
Mr Thienprasit said the government ought to balance driving demand with supply development through the creation of new products and well-equipped infrastructure in the second-tier cities, which would require a long-term commitment.
EXECUTION A KEY FACTOR
Nattaporn Triratanasirikul, deputy managing director of Kasikorn Research Center (K-Research), said accelerating government spending should become another engine of growth for the Thai economy in the second half of 2024, but effective execution of budget disbursement is key.
"We have seen an acceleration of budget disbursement since May after the 2024 budget endorsement was delayed by five months. Nonetheless, a degree of budget disbursement slowed down somehow in June, possibly due to the slow process of public procurement," she said.
To achieve the same level of 78% disbursement seen in fiscal 2023, disbursement must be twice the pace of that seen over the past few months during the remaining three months of the current fiscal year which would be "quite challenging", she told the Bangkok Post.
"In the second half of the year, budget disbursement should support tourism, which is the only growth driver this year to date, in boosting the economy along with exports, which have picked up recently," said Ms Nattaporn.
Rakpong Chaisuparakul, senior vice-president of KGI Securities (Thailand), said government spending data for May has led the brokerage to believe second-quarter GDP growth could come out stronger than most investors anticipated.
According to KGI, budget disbursement has soared 121% year-on-year since the government was able to begin disbursing the fiscal 2024 budget on April 29 this year.
"Preliminarily, the solid public spending may support second-quarter GDP growth of around 2.5% year-on-year, which would be significantly higher than first-quarter year-on-year growth of 1.5%," he said.
"In our view, most of the government disbursement was general government consumption, but the public investment disbursement could still be delayed until the fourth quarter," Mr Rakpong said.
Investor optimism could strengthen in August, backed by second-quarter GDP year-on-year growth possibly beating the current consensus of 1.8-1.9% as government spending soared, clarity has been provided on court rulings pertaining to the main opposition Move Forward Party and the status of Prime Minister Srettha Thavisin, along with the push concerning the digital wallet stimulus for at least the first batch, covering 15 million people, he added.
SIGNALS IN SEPTEMBER
Sanan Angubolkul, chairman of the Thai Chamber of Commerce (TCC), said following the disbursement of fiscal 2024 budget since May 2024, the government has been expediting state enterprises and local government organisations to accelerate spending of their expenditure budget and investment budget to stimulate the economy across all industries.
As the government has set a 75% disbursement target for investment expenditure in fiscal 2024, which is expected to add 30-40 billion baht to the economy per month until the end of the third quarter, Mr Sanan said the country should see more clear signs of economic recovery in September this year.
According to the University of the Thai Chamber of Commerce (UTCC), the economy has continued to see an uneven recovery, driven mainly by rebounds in the tourism sector as well as the agricultural sector, thanks to an improvement in crop prices.
However, other economic activities remained pressured by rising production costs amid a global economic slowdown. This particularly affected the export sector.
A consumer confidence survey carried out by the university found consumer purchasing power, particularly at the grassroots level, has begun to improve, but spending on durable goods and services has declined.
The economy is continuing to recover slowly during this third quarter amid declining consumer and business confidence as a result of political uncertainties and higher living costs.
The TCC and UTCC both estimate that the economy will grow by 2.4-2.5% this year, or within a range of 2.8-3% if the digital wallet handout scheme is implemented.
OPTIMISTIC OUTLOOK
The Eastern Economic Corridor (EEC), which covers parts of Chon Buri, Rayong and Chachoengsao, is set to become the country's high-tech industrial hub, hosting 12 targeted S-curve industries, including new-generation cars and smart electronics.
The Industrial Estate Authority of Thailand (IEAT) is helping the government utilise the budget for developing the EEC through its key projects, notably the construction of the Smart Park Industrial Estate.
In fiscal 2024, the authority is going to spend 620 million baht on the development of this new industrial complex in Rayong.
According to media reports, the cabinet resolved in 2020 to approve the Smart Park project, which required a total budget of 2.3 billion baht.
As of March 25 this year, more than 80% of the construction had been completed, according to the IEAT.
The building work fell slightly behind the original schedule, but the IEAT believes the Smart Park will open by the end of 2024.
"Authorities are distributing new budget to support IEAT projects countrywide," said Veeris Ammarapala, governor of the IEAT.
Mr Veeris said he was aware the budget allocation for fiscal 2024 faced a delay, but with the government's efforts to accelerate spending, he is confident the entire economy would not be seriously affected.
"I would like to suggest the government keep on promoting development of S-curve industries," he noted.
ENVIRONMENTAL COMMITMENTS
Part of the 2024 budget will be allocated to support the government's plan to buy more renewable power from companies in a move to reduce the country's dependence on fossil fuels, said Sarat Prakobchart, deputy director-general of the Energy Policy and Planning Office (Eppo).
Authorities are in the process of signing power purchase agreements with 175 companies, which were selected to develop renewable power plants under the state renewables scheme, overseen by the Energy Regulatory Commission.
"People will begin to see the development of new green power generation facilities in the second half of this year," Mr Sarat pointed out.
He said the government is on the right track by allocating a budget for the promotion of clean energy development because Thailand is committed to achieving carbon neutrality, a balance between carbon dioxide emissions and absorption, by 2050.
According to Mr Sarat, there had not been any serious negative impact caused by the delayed disbursement of the fiscal 2024 budget on the state renewables scheme.
Additional reports by Phusadee Arunmas, Lamonphet Apisitniran and Yuthana Praiwan