Thailand’s economic growth could once again exceed 4 percent this quarter with a subsidy for the poor boosting consumption, a senior finance official said.
“They spent almost 100 percent” of the money, said Suwit Rojanavanich, director general for the Finance Ministry’s fiscal policy office, referring to 10 million low-income earners who started receiving as much as 300 baht ($9) a month in October.
The program is very successful and along with state spending and investment will boost growth to more than 4 percent in the last quarter of the year, he said in an interview in Bangkok on November 21.
After years of economic malaise, Thailand is catching up with the boom in Southeast Asia as the government steps up measures to boost domestic demand, including a $46-billion infrastructure plan and tax breaks for year-end shopping. The end of a yearlong mourning period for King Bhumibol Adulyadej also strengthens the outlook for consumer spending.
The economy expanded 4.3 percent last quarter from a year ago, the fastest pace since 2013, supported by traditional pillars of growth like exports and tourism. The state planning agency forecast growth of 3.9 percent for calendar year 2017 and as much as 4.6 percent next year.
The government has fiscal space if needed to boost the economy as public debt and the budget deficit remain low, Suwit said. The state is increasing spending to a record in fiscal year 2018, which started in October, while targeting a budget deficit of 450 billion baht, about 2.6 percent of GDP. The shortfall was a record 542 billion baht in the previous fiscal year.
“We are very strict as we are the ministry that provides the budget to the country,” he said. But “if we need to, we still have several bullets on the fiscal side.”
- Public debt ratio not exceeding 60 percent of GDP
- Fiscal deficit not exceeding 3 percent of GDP
- Debt service ratio not exceeding 15 percent of the budget investment spending of 25 percent of total
- Expenditure under the law, the budget deficit cannot exceed 20 percent of the budget
The economy will withstand the risk of capital outflows as the US proceeds with rate increases, Suwit said. Bank of Thailand, which has kept its benchmark interest rate near a record low since 2015, faces speculation from some economists that it will tighten next year.
“Now we are like a safe haven for some fund managers because we offer a little bit higher rate than the US,” Suwit added. “That’s why we have a lot of flows. If the US increases interest rates, the funds will flow out. But we won’t have any strong effect as nonresident investment in the bond market is only around 16 percent. We won’t have any difficulty if they move out.”