The latest economic growth figures indicate it is time for the government to revamp its economic team.
The National Economic and Social Development Council reported last week that GDP growth in the fourth quarter of last year slipped to a five-year low, attributable largely to poor performance in exports and slow state investments. The economy grew just 1.6% year-on-year in the fourth quarter, decelerating from 2.6% in the previous quarter. For the whole year, the economy grew 2.4% -- its slowest rate since 2014.
The breakdown of the Q4 GDP figure sheds some light on the root problems of the economy.
Even though local consumption was robust with a 4.1% increase -- marking consistent growth alongside 4.3% year-on-year in the third quarter, due mainly to low-interest rates and the government's stimulus measures -- and private investment increased by 2.6%, exports and state investment contracted.
Exports in the fourth quarter fell significantly by 4.9% year-on-year while state investment dropped drastically by 5.1% as a result of a delay of the 2020 fiscal budget bill and slow budget disbursement for transport projects which are a major portion of state investment.
These figures indicate the key factors that weighed on the economy in the fourth quarter, as well as the entire year, were falling exports and a sharp drop in public investment.
In terms of structural prospects, three key economic ministries oversee these economic factors -- the Finance Ministry which is responsible for fiscal policies and key stimulus measures, the Transport Ministry which oversees transportation project development, and the Commerce Ministry which is in charge of exports. The Q4 GDP figures indicate that economic driving engines supervised by these ministries did not work consistently.
This is not beyond expectation because the three ministries are controlled by three different coalition parties, with the Palang Pracharath overseeing the Finance Ministry, Bhumjaithai in charge of the Transport Ministry and the Democrats running the Commerce Ministry. Prime Minister Prayut Chan-o-cha, who runs the government economic team, has failed to ensure harmony in their economic policies.
An example of policy inconsistency that has affected state investment is the Orange Line mass transit route development. The 140-billion-baht project was supposed to kick off last year but only received cabinet approval late last month. Originally, the previous Prayut government planned to have a private company co-invest in this project under a single contract.
Following the general election last year, the Bhumjaithai Party wanted to put projects for new mass transit routes and those for extensions of existing routes into two different contracts, instead of one agreement as originally planned, saying this would confer greater benefits. So far, all this approach has achieved is further delays to these projects.
The economy is expected to worsen in the first and second quarters of this year mainly due to the impacts of the Covid-19 epidemic which has hit tourism and related businesses. As long as the government's economic ministerial team continues not to function efficiently, the economic outlook is only likely to get gloomier.
It is expected that a cabinet reshuffle will happen after the censure debate which starts today. It must be hoped that these changes can rejuvenate the economic team ahead of a tough remainder of the year.