Striving for a more balanced economy

Striving for a more balanced economy

Unemployed and homeless people in Pathumwan district wait for food donations in this April 19 file photo. (Photo by Nutthawat Wicheanbut)
Unemployed and homeless people in Pathumwan district wait for food donations in this April 19 file photo. (Photo by Nutthawat Wicheanbut)

In its bid to alleviate the economic damage from the coronavirus pandemic through the 1-trillion-baht borrowing scheme, the Prayut Chan-o-cha government aims to provide immediate relief to millions who are in trouble, and also restore the grassroots economy, with a view to better balancing the economic system, so it depends less on exports and tourism.

The first task, with the help of 600 billion baht, will benefit 26 million people, including 16 million workers in the informal sector, and farmers who are to get a 5,000-baht monthly cash handout for three months. Then, 400 billion will also be injected into their communities. The second task is indeed a big challenge, with many casting doubt on its likelihood of success. Lest we forget, several governments have spent trillions of baht in shoring up the grassroots economy over the past two decades.

Because of the pandemic, the economy has been paralysed since late March, after which it plunged into crisis. This is the biggest economic malaise we've faced since the Tom Yum Kung crisis in 1997. Economic rehabilitation is inevitable.

Thus, the government will use that 400 billion baht to strengthen communities in accordance with the sufficiency economy theory.

There will be projects in four areas: agricultural development; building infrastructure, including water sources; tourism development; and promoting digital systems in the farm sector to help local communities connect with a wider market.

As I mentioned earlier, trillions of baht have been injected into the farm sector over the past two decades with pledging or price guarantee schemes, cash handouts to farmers and subsidies to lower production costs, to name just a few.

Even today, a tremendous amount is being spent on agricultural development, but the results are far from satisfactory. The question is: What's happened in this sector? Will the latest efforts succeed?

In the past, politicians treated assistance to the farm sector as a tool to help them reap political benefits. Most of the projects, therefore, were only designed to please farmers and villagers.

In exchange, the politicians who initiated them hoped to secure votes.

As a result, farmers were provided with cash rather than a solid development plan. In fact, financial support and development plans must go hand in hand. Farmers also need to learn to adapt to the changing market. Those unwilling to change don't deserve the state's help.

Those involved in farm sector development have certainly spoken a lot about strengthening it to achieve a balanced economy rather than actually bringing this vision to reality.

As a result, 80% of the country's revenue is from exports and inbound tourism.

It's the lockdown measures resulting from the pandemic that have given us such a clear picture about our economy, which on the surface appeared strong but had a number of soft spots.

If this crisis shows us anything, it's that we cannot wait any longer to make the necessary changes. If we don't strike while the iron is hot, we may end up with a much larger crisis down the road.

That said, our current predicament has also highlighted our strengths in a number of ways.

Cooperation and discipline among Thais to curb the coronavirus pandemic has won international recognition. Moreover, as the country is a major food producer, we have not experienced food shortages.

Likewise, as we are the production base for several consumer products, we have not witnessed any shortages of necessities.

Most importantly, our fiscal discipline has proven to be useful during this time of crisis. The favourable fiscal situation has made it possible for the government to take out the 1-trillion-baht loan for relief and rehabilitation of the troubled sectors.

However, there are concerns for the future of the economy if the crisis drags on for a long period of time, and that may affect public debt, causing it to rise even higher than the acceptable level of 60% of GDP.

Although the government has tried to calm fears by noting that some countries have public debt exceeding 100% of GDP, the economy and capacity to write off debts varies from state to state.

Once the 1-trillion-baht royal decree becomes effective next year, we will see our public debt rise to 58%, from 42% this year.

At the same time, we have seen weaknesses in the Social Security Fund (SSF). Several million workers have been laid off or are receiving smaller pay cheques. But compensation under the SSF hasn't been made in a timely fashion.

It's reported that some 1.1 million SSF members out of the 11 million total have filed requests for unemployment compensation, with the amount surpassing 20 billion baht.

Although the SSF claims it has more than 160 billion baht stashed away to pay such compensation, if the crisis drags on, with more workers losing their jobs, there may not be enough cash from the fund to cover them all.

Finally, the problem of the urban poor makes us realise the weaknesses in our economic system. After the lockdown, millions of urban poor who depend largely on a daily minimum wage were deprived of an income.

Without little or no savings, they are in deep trouble. They have to depend on donated food for survival. Lines of people queuing for food is a sad sight.

We need to learn the lessons of this pandemic, and fix our shortcomings, creating a stronger protection system for the country's economy.

We cannot be complacent and operate as if its business as usual, but embrace changes. Otherwise, another crisis is almost certainly inevitable.

Wichit Chantanusornsiri

Senior economics reporter

Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.

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