For the first time in five years, Thailand will soon be ruled by an elected coalition government. But the new administration, which is being formed by coalition allies, will not have any honeymoon period.
In addition to an unenviable task of maintaining the stability of the government, the next prime minister, whoever wins the vote in parliament, will also have a very challenging job in handling the low-growth Thai economy as well as the economic hit from the US-China trade war.
Given that the new government is a coalition of more than 10 political parties, maintaining its stability will not be easy. With its thin majority in parliament, the new administration will also find it hard to implement policies or measures to cushion the impacts of the global economic slowdown on the Thai economy.
As a result, the primary agenda of this government is to handle this most pressing challenge. It will have to revive the economy by stimulating domestic growth because it will be unable to do much to boost the sagging export sector which is subject to global economic effects.
Importantly, it will have to ensure that the 2020 fiscal budget bill will be passed by parliament. The bill covers a total expenditure budget of 3.2 trillion baht. It will be the key to driving domestic economic growth.
However, the bill, which was drafted by the National Council for Peace and Order (NCPO), may not get the blessing from coalition parties which did not take part in the making of it. For these political parties, the annual budget allocation is their most important tool that can help them stay connected to the people in their political strongholds. In the past, the drafting of an annual budget bill has always been the venue for politicians from governing parties to negotiate and fight for their shares to ensure that they could get as-large-as-possible budgets allocated to their constituencies.
Having the 2020 budget bill passed can at least help sustain the current level of growth during a sluggish period for the economy.
According to the Bureau of the Budget's original calendar, the first reading of the bill is scheduled for June 13 and the second and third readings will take place on Aug 29. However, the schedule is expected to be delayed for three months given the current political situation.
In the past decade, the Thai economy has gone up and down. Since the May 22, 2004 military coup, it has been weak.
Thailand's economic growth in 2014 was as low as 0.8%, which was a result of a lack of economic confidence in the aftermath of the coup. The military government has implemented several policies to boost the economy, from financial injections of over 100 billion baht to the poor and grassroots population to the upgrading of the country's aviation standards, which had been red-flagged by the International Civil Aviation Organisation since 2015.
Its key policies also include the tackling of illegal, unreported and unregulated fishing in order to win back confidence from the global business community.
Moreover, it has pushed for domestic investment projects -- the largest combined state investment scheme the country has seen in past decades. For instance, it has accelerated the construction of 10 rail lines in greater Bangkok. The implementation of its flagship Eastern Economic Corridor has also brought about huge investment in schemes such as the 120-billion-baht high-speed train project linking Don Mueang, Suvarnabhumi and U-Tapao airports and the 270-billion-baht project to develop the U-Tapao airport and upgrade it to be an international airport.
The military government's heavy investment yielded results, making Thai economic growth in 2018 reach a level of 4%, the highest in the past five years. Such growth means a great deal to Thailand. It shows that the country managed to reach its economic potential. It also helped generate enough state revenue for the government to finance its policies to mitigate poverty and reduce economic inequality; chronic problems for the country. A recent survey by the Finance Ministry indicates that 11.4 million Thais live in poverty.
But we Thais had just a brief moment of joy. This year, we have experienced economic recession again.
On May 21, the National Economic and Social Development Board (NESDB) adjusted its growth projection for this year from a previous forecast rate of 4% to 3.6%. The recession has been caused by a global economic slowdown driven mainly by the trade war between the US and China.
Thailand's exports have been hard hit by the trade war. In the first quarter of this year, the economy was contracted by 3.6% compared to the same period of last year.
Thailand's export figures in April show a reduction of 2.5%, forcing the NESDB to lower its export growth projection for this year from 4.4% to 2.2%. The drastic drop in its projection figure has prompted some research houses to come up with their projections of this year's economic growth in a range of merely 3%.
During the past decade, Thai economic growth has been volatile and inconsistent, leaning towards the low-growth trend. On the other hand, if the Thai economy had maintained consistent growth and achieved its growth potential, I believe that it would be in a much better position today. Unfortunately, the country in the past 10 years has suffered political instability, prolonged street political protests, riots in the city, the 2011 severe flooding and the 2014 coup, which is unlikely be the last putsch.
Therefore, the big challenges that the new coalition government will face will lie beyond the need for it to survive its term. It will have to ensure that the Thai economy will not be at risk of further low growth as the result of the global economic downturn and political instability.
Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.