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Maddy, an online entrepreneur operating under the alias Maddy, participated in Thailand’s recent general election, which witnessed a record-breaking turnout of nearly 39 million voters. The unofficial results, declared by the Election Commission, brought joy to supporters of the Move Forward Party (MFP). However, non-military political parties face obstacles due to the recently revised constitution. Despite the MFP-led coalition having 313 members of parliament, they still require additional votes from the upper house to secure the necessary 376 seats for leadership, sparking concerns about the country’s political trajectory.
From a business perspective, Maddy, a 25-year-old entrepreneur, has uncertainties regarding Thailand’s economic prospects as the winning parties struggle to form a coalition government. Maddy voted for the Pheu Thai Party, as their digital wallet platform and economic policies aligned with her business interests. She expressed a desire for the government to collect taxes from illegal businesses or tax evaders, which could generate significant revenue for the country. Maddy also highlighted the presence of foreign-owned marijuana shops in Chiang Mai and emphasized the need to support local growers. She believes that a supportive coalition government, as promised by the parties, would greatly benefit the economy by fostering support for both small and large businesses.
However, the delay in forming a new government could impact the approval of the fiscal 2024 annual budget bill, potentially affecting budget disbursements from the fourth quarter of 2023. Furthermore, fulfilling campaign pledges aimed at alleviating living costs caused by high energy prices may impose fiscal constraints on the new government, as these initiatives require a substantial budget. Consequently, the think tank suggests that while such pledges could stimulate short-term economic growth, they may lead to a budget deficit due to limited revenue sources. The allocation of the budget might be insufficient, and expanding tax collection will take time for the economy to expand.
Economists warn that if the government has to increase the budget deficit to implement short-term economic policies, the burden of government debt will escalate once Thailand’s policy rate reaches 2%. The SCB Economic Intelligence Center (SCB EIC) anticipates a gradual increase in interest rates by the central bank’s Monetary Policy Committee, reaching a terminal rate of 2.5% in the third quarter. Excessive government debt could result in competition with the private sector for capital resources, which could raise costs for businesses during the economic recovery.
Despite the challenges, there is a sense of cautious optimism among some voters, including Tritdhamon Chanthanapaiboon, a 24-year-old graduate who desires democratic reform in Thailand. Tritdhamon voted for the Move Forward Party (MFP) and believes that the coalition will eventually succeed. She hopes to witness the MFP fulfilling its promises, such as raising the daily minimum wage to 450 baht and implementing the Progressive Liquor Act to diversify income sources for farmers.
Economic projections from K-Research indicate a GDP growth rate of 3.7% for this year, driven by a 2.7% year-on-year expansion in the first quarter and a 1.9% growth from the previous quarter. The service sector experienced significant growth of 87.8% year-on-year, primarily due to increased tourism activities. However, the Thai economy faces risks from a sluggish global economy, including geopolitical conflicts, commodity price volatility, tight monetary policies by major central banks, and ongoing banking crises in Western countries.
Export outlook appears gloomy, with a projected 1.2% growth in value for this year, amid downside risks from the global economy. Export contraction is expected in the second quarter, followed by expansion in the latter half of the year, driven by strengthened Chinese demand. As a result, the current account is expected to have a surplus from both trade and service balances. However, internal risks such as political instability must be monitored. While the likelihood of liberal parties forming a government has increased after the announcement of informal election results, uncertainty remains. Positive effects on the economy are anticipated as the new government begins implementing its policies.