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The Price of Populism

by Ulani Louangrath
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After the Songkran celebrations peter out, Thais must contemplate the general election on May 14 and decide whether political parties’ campaign pledges will really create a healthier economy.

The Pheu Thai Party’s push for a one-time handout of 10,000 baht to people to stimulate the economy adds to a growing list of concerns among economists and business leaders over whether populist policies will incur huge costs for the country.


Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce (UTCC), said populist campaign promises need to be scrutinised.

“Where will the funding come from to support such policies? Are these policies worthwhile and necessary, and how they will affect the country in the short and long term? Who benefits from these policies and who loses out?” he said.

“Referring to the proposal to give away 10,000 baht in ‘digital money’ to everyone age 16 and older, which is expected to cost 500 billion baht, one positive viewpoint is this proposal would encourage more people to take part in a cashless society.

“However, we also have to consider where the money comes from. Will it be borrowed? If so, will it increase the country’s debt-to-GDP ratio or generate revenue? Will the national debt increase, and will national monetary and fiscal stability be affected if the revenue generated is less than the borrowed amount?”

Mr Thanavath said it is worth considering whether spending 500 billion baht on a handout would be better spent investing in water systems, irrigation, roads and public utilities to benefit the country in the long term.

He said a thorough cost-benefit analysis, including who stands to gain and lose, should be conducted.

“Is it necessary to provide a handout to those who have high incomes, earning 100,000 baht per month?” said Mr Thanavath.

Remote stores without WiFi may lose a competitive advantage to stores with WiFi, he said.

Mr Thanavath said debt suspension should not be offered frequently because it will condition people to expect debt forgiveness during election season, which should only be extended when justified.


Therdsak Thaveeteeratham, executive vice-president of Asia Plus Securities, said most political parties promote populist policies, which is worrisome because it will increase the country’s fiscal burden.

“These populist policies may damage fiscal discipline and raise the public debt ceiling, putting the country at risk of seeing its credit rating downgraded during the recession,” he told the Bangkok Post.

According to Mr Therdsak, statistics showed over the past 20 years (2002-22), Thailand had a budget deficit for 18 years and a balanced budget for only two years. Consequently, the country has an accumulated budget deficit of 6.6 trillion baht, with public debt of around 10 trillion baht, representing 61.1% of GDP.

For fiscal 2023 ending in September, the central budget is 590 billion baht, of which more than half is for spending on state welfare and pensions. Some 93 billion baht of the remaining budget is set as an emergency reserve for use in times of need.

“If the parties pledging populist policies form a government, the remaining central budget would be insufficient to deliver what they promised,” he said.

“They might have to revise expenditure in the 2024 budget from the original 3.5 trillion baht to cover future spending.”

A new government can collect more funds by raising taxes or increasing borrowing. Political parties normally take the less painful path, which is borrowing to raise money quickly, Mr Therdsak said.

More borrowing could raise public debt to a ceiling of 70% of GDP, he said.

According to some calculations, parties would need to borrow an additional 1.56 trillion baht to support their populist policies, said Mr Therdsak.

The 10,000-baht giveaway would require a huge budget to stimulate consumption, as Pheu Thai Party claims.

“This one-time handout could succeed or fail in pumping up the economy. Other political parties promised welfare measures, which naturally generate a multiplier effect,” he said.

Mr Therdsak said one certainty is the increase in minimum wages will cause the private sector to bear higher financial costs in the future.

“We want to see more investment in infrastructure projects, which form an important foundation for Thailand’s long-term economic growth,” he said.

“So far, no party has focused on this issue, sticking to populist policies that increase the nation’s debt burden without knowing what the future may bring.”


Amonthep Chawla, chief economist at CIMB Thai Bank (CIMBT), said many parties proposed populist policies during their campaigns, but almost none have focused on the country’s economic restructuring to sustain expansion and strengthen Thailand’s competitiveness over the long term.

“There are few policies aimed at developing labour skills or increasing people’s income, which has been declining, especially for lower-income earners,” he said.

Mr Amonthep said the 10,000-baht handout should increase consumption in the short term.

“If this policy can expand the country’s tax base through digital wallets and generate tax income, it would be beneficial for the country,” he said.

“However, there are concerns about the financial risks associated with such a handout, including fiscal discipline, fiscal balance and public debt. All the policy details should be disclosed before we can analyse its pros and cons.

“Thais have been familiar with populist policies for a long time, but in the past, parties and politicians did not take responsibility for their campaign pledges.”

Tim Leelahaphan, chief economist at Standard Chartered Bank (Thai), said all political parties now propose populist policies, unlike in past elections when only some parties did so.

“Although many populist policies may be proposed, some could be cut in negotiations during the new government’s formation, while others may be adjusted,” he said.

“It’s too early to conclude whether these policies will have a positive or negative impact on the economy.”

According to Mr Tim, Thailand’s economy is driven by domestic consumption and tourism. Any campaign promises that stimulate these two segments would support the country’s economic growth, he said.

Standard Chartered will analyse the potential positive and negative impacts of populist policies that may be implemented by a new government, considering the fiscal risks, said Mr Tim.

The new government must pay more attention to fiscal balance and reduce the fiscal deficit in 7-10 years, maintaining fiscal discipline, he said.


Sisdivachr Cheewarattanaporn, president of the Association of Thai Travel Agents, said political parties should not introduce populist policies mainly focused on distributing money without creating a long-term impact, particularly projects that do not help people or businesses sustain their livelihood.

He said budgets must not rely on borrowing because it creates risks for the country’s financial stability.

Political parties offering giveaways should be able to clarify the sources of funding in detail, how they plan to implement the handouts, and they must guarantee that it will not destabilise the economy, said Mr Sisdivachr.

“Election ploys like monetary giveaways draw public attention and may prove successful,” he said.

“Based on our experience, especially during the past eight years, we should hope all the promises don’t become a reality when candidates form a new government.”

No political campaigns have prioritised developing the tourism industry, which is unfortunate because the sector needs a stronger foundation, said Mr Sisdivachr.

“Giving money to people or businesses to stimulate the economy might prove effective in winning an election, but the tourism industry wants policies that can assist it in the long run,” he said.

“They should not give us a fish that feeds us for one meal. They should provide us with a fishing rod so we can survive on our own.”


Echoing others, Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade and Industry, observed that political parties do not suggest new long-term solutions to economic challenges, instead sticking to old tactics aimed at drawing votes through populist policies.

Mr Tanit said he views the election campaigns as a tool the parties use to build a clear picture of their policies in people’s minds, beat rivals and secure House seats.

“The business sector wants to see more concrete policies that will drive forward the economy and improve people’s quality of life in the long term,” he said.

Many campaigns appear to focus on government spending and pay little heed to economic sustainability, said Mr Tanit.

“If parties continue to push populist policies and win elections, they have to keep their word to spend a huge amount from the state coffers,” he said.

“The result will be higher taxes on most products to increase the budget.”

This is not good for Thailand, which is struggling to deal with high inflation, volatile foreign exchange rates and poverty amid an uncertain global economy, which is expected to enter a recession this year, said Mr Tanit.

The number of people living in poverty in Thailand is estimated at 20 million, a massive chunk of a population numbering 70 million, he said, basing the estimate on the tally of state welfare cardholders.

Designed to help low-income earners and vulnerable groups, welfare cards give holders a package of financial aid, including spending privileges of 300 baht a month to buy goods.

Deputy Finance Minister and Palang Pracharath Party secretary-general Santi Promphat said earlier the number of registered cardholders is expected to reach 18 million this year, up from more than 13 million last year.

Widespread poverty and economic difficulties will deal a heavy blow to the economy, with the impact clearly seen from next year, said Mr Tanit.

Kriengkrai Thiennukul, chairman of the Federation of Thai Industries, shares a similar view as Mr Tanit on party policies being unsustainable.

Populist policies may boost the economy in the short run, but they cannot solve the root cause of economic problems, he said.

“I don’t think populist policies will effectively help Thais escape poverty or reduce high household debt,” said Mr Kriengkrai.

Over the past 12 years, household debt increased significantly from 59.3% of GDP in 2010 to a peak of 90.1% in 2021, mainly attributed to the impact of the pandemic, according to the Bank of Thailand.


Aat Pisanwanich, director of the International Trade Studies Center at the UTCC, said parties’ main campaign themes can be divided into six categories: minimum wage hike, farm subsidies, economic stimulus, supporting small and medium-sized enterprises, energy policy, and improving purchasing power.

All of these pledges combined require a budget of 8 trillion baht, according to their campaigns.

The Pheu Thai Party’s campaign has the highest budget of 3 trillion baht, followed by the Move Forward Party at 1.9 trillion, Palang Pracharath Party at 1.5 trillion and the Democrat Party at 800 billion.

Mr Aat said there is a need to increase people’s purchasing power as the economy stagnates, but the assistance should be implemented on a one-time basis.

If parties keep pumping up purchasing power over and over, it will result in a heavier fiscal burden, he said.

Mr Aat said he agrees with policies to restructure energy prices. Thailand’s electricity rate is higher than rates in Malaysia and Vietnam, though most of the gas used to generate power in Thailand is from domestic sources.

However, he said he disagrees with price intervention for farm crops because such policies have never enabled farmers to have a sustainable income. Last year alone the government spent 400 billion baht on subsidies for five main crops.

Party platforms would be better served by focusing on how to help farmers cut production costs, said Mr Aat.

Athiphat Muthitacharoen, a lecturer at Chulalongkorn University’s Faculty of Economics, said foreign investors will view Thailand as lacking fiscal discipline if the country keeps incurring a fiscal burden without clear plans to seek new revenue.

Investors are not interested in the government continuing to raise the public debt-to-GDP ceiling to create more fiscal room. Instead, they want to see if the government’s policies can achieve economic expansion, said Mr Athiphat.

Source: Bangkokpost

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