Experts caution that gifts may result in budgets or borrowing that set new records.
Financial analysts warn that the populist election promises of major Thai parties might lead to spending of more than 500 billion baht ($14.8 billion) under the next administration, pushing the Southeast Asian nation’s debt and budget to historic highs.
The ruling Palang Pracharat Party has made a last-ditch effort to gain ground before the May 14 election by promising to provide each farm family 30,000 Baht.
Pheu Thai, the main opposition party, has pledged 10,000 baht for every adult over the age of 16, and other parties have pledged between 1,000 and 3,000 baht per month as welfare for the elderly.
Expert estimates suggest that the new government will spend between 240 billion and 540 billion baht to fulfill the pledges made by all parties because they all promised goodies.
When questioned, the Election Commission stated that there would only be two sources for the handouts: increased spending or borrowing. That most likely would make the economy worse by increasing the budget deficit or the public debt.
The parties contend that the subsidies would directly aid individuals and boost the economy. However, the business community and financial professionals vehemently disagree and have voiced their concerns.
In a recent news conference, Governor of the Bank of Thailand Sethaput Suthiwartnarueput warned that while spending money recklessly could assist the economy in the near term, it also has more serious consequences, such as large debts. He claimed that because the Thai economy is recovering, it needs more infrastructure improvement rather than stimulus measures to help it expand sustainably.
Thailand suffered during the 1997 Asian financial crisis and responded by taking significant measures to address the issue of governmental debt. In order to reduce public debt, the kingdom was mandated by the International Monetary Fund to implement harsher regulations and fiscal restraint. Since then, the nation has established a public debt ceiling of no more than 60% of GDP.
Until the COVID-19 outbreak prompted the government to raise the cap to 70% in 2021, Thailand had maintained its public debt at 40% to 50% of GDP for more than 20 years. This gave the government more budgetary room to sustain the economy. The public debt of the nation has now reached a record high of 60.43% as a result of this.
According to Somchai Jitsuchon, director of inclusive development at the Thailand Development Research Institute, the 500 billion baht in annual populist expenditures that Pheu Thai proposes to spend would result in public debt that is equivalent to roughly 3% of the nation’s GDP. If they implement these populist initiatives each year, “that could even break the 70% public debt ceiling over the next four years,” Somchai said. Pheu Thai has not made it clear how long the giveaways will continue.If a future administration chose to fund its populist agenda out of the budget, it would worsen the upward trend in deficits.
Thailand has maintained a fiscal budget deficit for decades in order to increase government expenditure and strengthen the country’s weak economy. In the fiscal years 2013–14 (October 2013–September 2014), the deficit was 250 billion baht; in fiscal 2019–20, it was 450 billion; and in fiscal 2022–23, it reached a record 700 billion baht.
According to a research by an expert at Kasikorn Research Center, “it is too burdensome to add another 500 billion of populist expense into the annual fiscal budget.”
Tarisa Watanagase, a former governor of the Bank of Thailand, wrote on her husband’s Facebook page that the Thai economy does not require populist policies to spur growth. Tarisa remarked, “Looking at these reckless policies, [they] made me feel depressed.” It could also cause Thai people to lack financial discipline and rely solely on such helicopter money, in addition to needlessly piling up debt.
