On March 26, 2019, a report from the Ministry of Finance indicated that the ministry has instructed the Fiscal Policy Office (FPO) to expedite the assessment of economic trends following the election in order to prepare an economic stimulus package. This will also include an economic report proposal for the new government to consider, as it has been observed that the Thai economy is expected to grow at a slower rate of less than 4% in the first half of 2019, largely due to a significant slowdown in exports and a delay in investment decisions as investors await clarity following the recent elections.


          The Ministry of Finance has initially assessed that the election results, which showed closely matched scores, are unlikely to positively impact economic growth, particularly regarding foreign investors' confidence in the government formation. Although there are political parties that received more than half of the votes, it may not be sufficient to create stability for driving economic policies or enacting various laws.


“Initially, it was assessed that if the election concluded with one party leading clearly or forming a government with a solid majority, it would restore confidence in both domestic and foreign investment, leading to increased investments in the second half of the year. However, today, if the government formation has a slim majority, concerns about the overall economy remain high,” the report stated.


          Regarding the economic stimulus measures, the FPO is currently awaiting the assessment of economic growth figures for the second quarter of the fiscal year 2019, which will conclude at the end of March, to determine the direction of the economy. Measures will be clearly outlined for each sector; for instance, if the investment sector faces issues, stimulus measures will be introduced to boost investment. If the export sector remains weak, measures to promote exports will be implemented. These measures will be targeted solutions that can be enacted immediately without waiting for the new government, as the current government holds full authority to manage the country and is not a caretaker government.


          As for the implementation of the state welfare card (poor people's card) policy, this measure will continue until the end of September 2019 as planned, regardless of whether there is a change in government. This is because the government has already allocated a budget for it. Recently, at the beginning of March, an additional budget of 37.9 billion baht was allocated, which is sufficient to support the 14.5 million low-income individuals.


          Additionally, the Ministry of Finance has requested an allocation of 40 billion baht for the fiscal year 2020 to be directed into the People's Welfare Fund for grassroots economy and social development, awaiting the new government’s consideration for measures to assist low-income individuals and develop the grassroots economy and society. This could be implemented through the existing welfare card system or other projects that the new government plans to consider and establish.


          Mr. Chao Kaengchon, Managing Director of Kasikorn Research Center Co., Ltd., revealed that investors in the capital and money markets are still monitoring the official election results to see how many seats each party has and who forms the government. However, the most critical issue is how many MPs the coalition government will have. If it exceeds 250 votes by a slim margin, it still raises concerns among investors about the government's ability to manage the country and drive policies, which is crucial for political stability, especially for the urgent economic stimulus measures, as the economic growth in the first quarter is expected to be below 4%.


          “Investors believe that if the government has more than 280 seats, it would indicate a certain level of stability. If it exceeds 300 seats, that would be even better, providing more confidence to investors. However, if it is less than 260-270 seats, there may be concerns because it should not be forgotten that in parliamentary considerations, some positions cannot vote, or some MPs may not be present, which could pose problems for passing votes and managing the country immediately,” Mr. Chao stated.

 

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