Change of economic structure requested

Prime Minister Prayut Chan-o-cha, center, and public and private sector leaders pose for a photo during the Better Thailand Open Dialogue seminar. The two-day seminar, May 19-20, provides an opportunity to address key issues for Thailand’s economic development. (Photo: Nutthawat Wicheanbut)

Thailand’s economic recovery is relatively slower than that of its ASEAN counterparts because the country’s national economic structure depends on conventional industries.

Danucha Pichayanan, secretary general of the National Council for Economic and Social Development, was speaking at the opening of the two-day open dialogue on Better Thailand on Thursday.

The event is co-organized by Chulalongkorn University Engineering Alumni Association, Faculty of Commerce and Accounting Alumni Association and Economics Alumni Association, in collaboration with the Joint Standing Committee on Trade, Industry and Banking. The forum allows leaders from the public and private sectors to share ideas leading to a better Thailand.

“Thailand’s economic structure is not yet immune to future risks and is still largely dependent on tourism and conventional manufacturing or production sectors,” Danucha said. “With the outbreaks of Covid-19 over the past two years, coupled with the continuing threats of the Russian-Ukrainian war, Thailand needs to accelerate economic and social restructuring to focus more on high value-added industries, technology, R&D, smart agriculture and automobiles, smart electronics and well-being.

He said these crises show that Thailand needs to fend for itself and focus more on the national economy.

Mr. Danucha said that the government and all parties concerned must cooperate and work closely together to reduce income disparities and redistribute income to people in the provinces, while large companies and small and medium enterprises must create a network. to link supply chains.

The government should focus its assistance programs on specific groups of poor people and support the development of a bio, circular and green (BCG) economy, decarbonization and human resources, he said.

Danucha said the government had limited fiscal space to stimulate the economy, with only 40 billion baht remaining under the 500 billion baht loan decree.

The government issued its first emergency loan decree in 2020 to authorize the borrowing of 1 trillion baht to fund its stimulus plans to fight the pandemic. A second decree was issued last year to allow the government to borrow an additional 500 billion baht.

Deputy Prime Minister Supattanapong Punmeechaow expressed optimism that Thailand’s economy will continue to improve thanks to the government’s economic stimulus measures and infrastructure development.

He said government investment in infrastructure projects has reached 2 trillion baht over the past seven years, helping to improve transport and logistics systems. The next phase of infrastructure development will focus on creating better connections to the country’s regions as well as neighboring countries, Supattanapong said.

“Given the severe impact of the deadly virus outbreaks and the Russian-Ukrainian war, cooperation between the public and private sectors is the most important factor in helping Thailand overcome such crises,” he said. .

STAY IN YOUR LANE

The Bank of Thailand does not need to follow the U.S. Federal Reserve in raising its policy rate, but instead takes into account internal factors for rate moves, central bank governor Sethaput Suthiwatnarueput said.

Even though the Fed has announced its intention to continue raising its key rate to rein in the rising inflation rate, the Bank of Thailand will focus on local economic circumstances, he said.

In terms of internal factors, the central bank would consider economic growth, financial stability and price stability or the rate of inflation, Sethaput said.

Thailand’s economy is gradually recovering and the central bank expects GDP growth of 3.2% this year. The institution is expected to revise its forecast next month.

He said the central bank monitors the monetary policy of the Fed and other central banks. A widening of the spread between the US rate and the Bank of Thailand’s policy rate would lead to foreign capital outflows, Sethaput said, but not to a significant extent.

The Fed’s rate hike has strengthened the US dollar against other currencies, including the baht, with the Thai currency depreciating 3% against the greenback year-to-date. This move is in line with regional currencies, he said.

Thailand’s stability against foreign factors is strong, with strong international reserves and a reasonable amount of offshore debt, Sethaput said. This buffer should allow the central bank to maintain accommodative monetary policy to support an economic rebound, he said.

“With a flexible inflation and exchange rate policy, the bank does not need to raise the policy rate in response to the Fed,” Sethaput said.

He said that given the volatility in the global economy and currency markets around the world, Thailand’s inflation rate is expected to rise further, similar to other countries.

According to the central bank’s Monetary Policy Committee statement in March, the country’s headline inflation is expected to be 4.9% in 2022 and 1.7% in 2023. Inflation will exceed 5% in the second and third quarters. of 2022, mainly due to rising energy prices. and the pass-through of food prices. However, inflation is expected to decline and return to the target range of 1-3% in 2023 as energy prices decline, the committee said.

Mr Sethaput said there was little chance of stagflation in the Thai economy as momentum remains for a recovery.

“Keeping the recovery trend of the Thai economy as smooth as possible is the central bank’s key role,” he said.

Finance Minister Arkhom Termpittayapaisith said that although Thailand’s economic recovery is slow, it has grown at a steady pace.

He said that for the next stage of the recovery, the direction of fiscal policy should prioritize three areas: the promotion of digital technology in the implementation of public policies such as government subsidy programs State ; promoting the adoption of electric vehicles; and strengthening the public health system.

Mr Arkhom said the country faced an economic double whammy from the protracted pandemic and the Russian-Ukrainian war.

RECOVERY PREPARATION

Governor of the Tourism Authority of Thailand (TAT), Yuthasak Supasorn, said tourism had suffered a major setback following the global outbreak, with foreign arrivals falling to a low point of 427,869 tourists in 2021, compared to nearly 40 million in 2019.

The situation has prompted tourism agencies to come up with a survival plan to help the country out of the crisis, such as subsidized loans, which have helped 7,847 operators, as well as stimulus campaigns to boost domestic consumption like “Moral Support”, a grant tour for health leaders and volunteers in 2020.

The TAT has also introduced a new service standard under the Safety and Health Administration to ensure the safety and hygiene of locals and tourists using new practices.

Mr Yuthasak said that as tourism gradually rises from the bottom, the TAT aims to revive tourism revenue to 2.4 trillion baht, or 80% of the 2019 level, but with only 50% of 2019 volume by next year.

High-value tourists are the focus, he said, with key segments categorized under a “4:3:3 composition”. The first group is made up of long-term wealthy foreigners, retirees, highly skilled professionals and Thai professionals.

Another group is divided by generation, namely Baby Boomers, Gen Z and Millennials, who are expected to be the first to move after the pandemic ends.

The final segment is behavior-based, including health and wellness as well as honeymooners who were unable to take trips during the outbreak, as these groups spend an average of 100,000 baht per trip. Leisure tourists spend an average of 50,000 baht per trip, Yuthasak said.

STRENGTHENING SUPPLY CHAINS

To bolster Thailand’s economy, the Federation of Thai Industries (FTI) is in talks with the Eastern Economic Corridor Office to set up a “security supply chain industrial zone” on the east coast, Kriengkrai said. Thiennukul, president of the FTI.

The new domain aims to solve a shortage of raw materials caused by disruptions in the global supply chain, allowing factories to continue manufacturing in times of economic turbulence.

“From the US-China trade war to the pandemic and the Russia-Ukraine war, countries have increasingly seen global supply chains disrupted by these events,” he said.

Mr Kriengkrai supports measures to help Thailand’s manufacturing sector avoid a shortage of raw materials during these crises.

During the Russian invasion of Ukraine, the FTI expressed concern that auto exports from Thailand could miss their target of one million units, following sanctions imposed on Russia, which is a major steel producer and exporter.

The FTI president has previously said he wants to see Thai industries become more self-sufficient, able to produce the components needed to sell them in the domestic market. He said the new industrial zone will help manufacturers be less dependent on imports of raw materials from countries suffering from economic problems.

There are 45 industries in Thailand and over 14,000 companies. About 30 percent of them need to import raw materials for production to sell domestically and abroad, Kriengkrai said, adding that these manufacturers need to continue exporting as it is the main economic driver of the economy. country.

“Exports account for 70% of GDP and industrial items account for 80% of export value,” he said.


Additional reporting by Dusida Worrachaddejchai and Lamonphet Apisitniran

Ida M. Morgan