Despite several "stimulus" measures launched by the government in the past year, the Thai economy is still being buffeted by the volatility of international trade. This year's growth projection has been adjusted to a level much lower than previous predictions due to a slowdown in exports, which account for 70% of the economy.
The cash injection measures have failed to boost the economy in 2019. And more challenges will arrive next year when the state will have to help cushion the impact on the Thai economy of global volatility caused by the Sino-US trade war.
In Thailand, the ongoing economic turmoil has hit low-income people, farmers and small- and medium-sized enterprises (SMEs) far harder than the wealthy classes. The impact contrasts with the 1997 Asian financial crisis, when the upper class suffered more than grassroots people.
Over the past two decades, there has been talk of the need to strengthen the domestic economy to balance the country's export sector. The idea is to reduce the impact of global economic volatility on Thailand. But for all the talk, it's business as usual, with the Thai economy still vulnerable to international turmoil.
Previous growth forecasts for this year have bordered on fantasy. In April, the Finance Ministry predicted a 3.8% expansion for the economy. In October, it adjusted the figure to 2.8%. On Nov 18, the National Economic and Social Development Council (NESDC), the government's think tank, lowered its growth projection to 2.6%.
Slow growth in the economy is a result of contraction in the export sector which is prey to the global downturn. The NESDC predicted export growth this year will be minus 2% -- a sharp decline from last year's expansion of 7.5%.
Moreover, private investment, which has played a prominent role in boosting growth, is forecast to expand by just 2.8%, much lower than the 3.9% of last year. Meanwhile, state investment, which is supposed to play a leading role in driving domestic investment, is predicted to grow by 2.3%, a drop from last year's 3.3% expansion.
The Prayut Chan-o-cha government stimulus measures merely offer a band-aid for serious economic wounds. They have not tackled structural economic problems so as to bring about long-term solutions that balance the economy's dependence on exports.
These measures include a rice farm subsidy of 500 baht per rai (for up to 20 rais per household) and crop price guarantees for oil palm and rubber. More stimulus is coming, in the form of farm aid measures awaiting cabinet approval, including crop price guarantees for tapioca and corn, and a subsidy for rice harvesting costs.
The government will spend a total of 212 billion baht on these agro-aid measures alone. However, these policies will only help farmers cushion the impacts of falling crop prices; they will not boost farm productivity or help farmers cut production costs.
Other stimulus measures are simply cash handouts. These include an extra monthly credit of 500 baht for welfare cardholders and an extra monthly allowance of 500 baht for the elderly. Another measure involves a one-year moratorium on principal repayment for members of the National Village and Community Fund.
Yet another is the Chim, Shop, Chai (Taste, Shop, Spend) scheme involving cash giveaways and cash rebates aimed at boosting local tourism. The scheme's first phase kicked off in September with 1,000-baht giveaways offered to 10 million Thai tourists who visit destinations outside their home provinces plus a 15% cash rebate of up to 30,000 baht on their tourism spending. The second phase involves a 1,000-baht giveaway for three million people. The third phase comes in the form of cash rebates.
Last month, the government also approved a new package comprising a property transfer fee cut to 0.01% from 2% and a mortgage fee reduction to 0.01% from 1%. The measure means buyers of homes priced up to 3 million baht can save nearly 100,000 baht. The Government Housing Bank is also offering mortgages for this group with fixed interest of 2.5% for three years.
Unfortunately, these measures will merely soothe the impact of the economic downturn, preventing drastic fallout and boosting economic sentiment.
More recently, the Bank of Thailand cut the policy interest rate to 1.25% from 1.50% and came up with measures to slow the appreciation of the baht, which has affected export competitiveness.
Next year will be a very challenging one for the Thai economy. The government should prepare for more global economic turmoil and strive to launch domestic economic reforms. An urgent priority is the need to strengthen long-term competitiveness of the farming and SME sectors. The same old stimulus measures in the forms of cash handouts, tax holidays or interest rate cuts will be outdated and no longer practical.
During this current era of "volatility, uncertainty, complexity and ambiguity", we must turn to changes and radical reform from within to help the Thai economy survive on the rocky road ahead.