June 1, 2023
BANGKOK – They were speaking at a seminar on Monday titled “Economic Problems Ahead for the New Government”.
The seminar aimed to properly understand Thailand’s current economic situation, the issues that needed to be addressed, and the new government’s policies.
The event was organised as the Move Forward Party and its seven coalition partners are in the process of forming the next government.
Former commerce minister Narongchai Akrasanee and Kiatnakin Phatra Financial Group adviser Supavud Saicheua agreed that the country’s economy was currently being influenced by both internal and external factors.
They explained that Thailand’s domestic economy is gradually recovering as a result of the tourism industry’s strong rebound. However, the pandemic’s negative impact remains, with the high cost of living being the biggest concern.
Lowering the cost of living
Narongchai pointed out that the greatest threat confronting both the people and the government was inflation and the high cost of living.
He said this was due to the difficulty in lowering the cost of living.
“We have seen an increase in energy prices over the last year and a half, and while international prices of oil and gas may fall, we are unable to reduce the prices of electricity, energy, oil and gas. It’s because of the massive debt that we’ve accumulated,” he said.
Narongchai explained that because of the government’s policy of controlling prices of goods during Covid, businesses now can no longer afford to lose money and must raise their prices to cover the costs.
Narongchai Akrasanee
Meanwhile, Supavud pointed out that the world’s largest economy, the United States, is still battling stubborn inflation, which has the potential to drag down the entire economy.
Thailand, as a small export-dependent country, will inevitably suffer, and the dire circumstances will make it even more difficult for the government to build a welfare state system, he said.
Support for coalition agenda
Former finance minister Pridiyathorn Devakula, Narongchai, and Supavud fully agreed with and supported the 23 strategic policies announced by the coalition partners.
“All of the policies are excellent,” Narongchai said, adding “no advice was required as the 23 policies outlined in the memorandum of understanding were all excellent. I can only hope that they will carry out all of these policies that will make Thailand a better country and a better economy,” he said.
He pointed out that the main concern now was political in nature.
“When we have a coalition government, there is always conflict between the coalition partners. If those conflicts are not properly managed, they could cause economic problems,” he warned.
Narongchai raised the issue of the government’s limited budget and the need to increase revenue so that all welfare policies to improve the people’s quality of life could be implemented without adding to the public debt.
Supavud agreed, pointing out that tax collection reform would be beneficial, but the move to raise taxes must be carefully managed.
Supavud Saicheua
Downside of hiking capital gains tax
He urged the new government to reconsider the idea of hiking the capital gains tax, claiming that it discourages businesses and investors from investing in Thailand.
Currently, the kingdom requires more investment from the private sector, both domestically and internationally. These investments not only help to keep the economy moving forward, but they are also a great source of job creation.
If the government wants to increase the fiscal budget through taxation, he suggested that the new government raise only 1% of the value-added tax (VAT).
“At the moment, VAT is the only tax that has the least impact on the economy. The government can collect up to 60 billion to 80 billion baht in the first year by simply increasing VAT by 1%. Every type of tax increase has an opposing voice and something to trade off. As a result, my approach primarily supports the method of increasing the cake size. Allow everyone access to a larger piece. Good taxation is based primarily on economic activity,” Supavud explained.
Pridiyathorn agreed with Supavud. He said that while welfare state policies were expensive, they must be implemented because they directly benefit vulnerable groups in society.
However, the key issue that the government must address is how to generate enough revenue to maintain the balance between revenue and expenditure.
The government should make the revenue plan clear, he added.
Pridiyathorn Devakula
“Do I support the welfare state? Yes, but the source of the welfare state’s funds must be reconsidered. All of the Move Forward Party’s proposed taxes will only lower investor morale, which is bad for the national economy,” he explained, adding that raising the VAT in 100 days is possible depending on how determined they are.
“Instead of raising capital gains tax, I believe the new government should increase value-added tax. This will have less of an impact on the economy, while still attracting investment,” he said
Government must prioritise
Realising that the new government will only have four years to manage the country, all three leading economists recommended that the government prioritise what needed to be done.
Narongchai urged the new government to reduce the cost of living and help people make a living. The ease of doing business includes implementing technology to improve government services.
“What I mean is to make people strong and dependable,” he explained.
Supavud pointed out the need to amend all the country’s regulatory guidelines along with seriousness in cracking down on corruption.
He also suggested that the government educate workers in skills that are in high demand in the market, such as data scientists and programers.
“What I would like the new government to do is upskill and reskill our workforce so that they can have the skills that the market requires, which will eventually sustainably increase their income,” he said.
Pridiyathorn emphasised the importance of relaxing migrant regulations and making the document process easier for those seeking to cross the border and work legally.
He said that as Thailand’s population ages, these foreign workers will play an increasingly important role in the country’s economy.