December 28, 2023
BANGKOK – The ASEAN+3 Macroeconomic Research Office (AMRO) assessed Thailand’s economic outlook and said that the pace of rebuilding fiscal space could be speeded up by introducing additional revenue-enhancing measures as well as tax policy and administrative reforms.
The AMRO economists suggested that Thailand consider restoring the value-added tax (VAT) rate to 10 percent from 7 percent. This should be complemented by financial assistance to lower-income individuals to ease their burden, streamlining deductions for personal income tax to align with the economic environment, and reforming corporate income tax incentives shifting away from tax holidays to more targeted tax incentives on new capital expenditures.
The Thai government has set a goal of 5% economic growth. The economists believe that the digital wallet scheme could boost gross domestic product by as much as 2 percentage points. However, it is a one-off scheme and unlikely to have a durable impact on potential growth, they cautioned.
The assessment by AMRO economists Justin Lim and Allen Ng added that the digital wallet scheme entailed a significant fiscal cost. Under this scheme, the government’s debt burden, which has already risen sharply from 40 percent of GDP in 2019 to over 60 percent in 2023 due to pandemic-related spending, would rise further, they warned.
More sustainable growth “can only come through investment and productivity enhancement measures”.
The digital wallet scheme might even delay the rebuilding of the fiscal space that underpins the resilience of the Thai economy. “Based on our estimates, although the debt-to-GDP ratio would still be below the 70 per cent ceiling set by the government, the pace of fiscal consolidation will likely be delayed by at least three to five years.”
The experts suggested that continued adherence to fiscal consolidation plans was essential, and priority should be given to budgeted growth-enhancing fiscal spending, especially in the areas of infrastructure development.