Bangkok: The National Economic and Social Development Board (NESDB) has reported that recent flooding has led to a 0.5% contraction in employment, particularly affecting the agricultural sector. The NESDB recommends a gradual increase in Value Added Tax (VAT) to boost government revenue.
According to Thai News Agency, the flooding, ongoing since August, has caused a notable decline in employment, with the agricultural sector experiencing a 2.9% decrease. This marks the seventh consecutive quarter of decline, exacerbated by younger generations opting for jobs in industrial and service sectors instead of agriculture.
In response to these challenges, the NESDB suggests implementing measures to support farmers, including expedited compensation, rehabilitation efforts, and production support. The NESDB is also monitoring agricultural non-performing debt, following the Bank for Agriculture and Agricultural Cooperatives’ approval to establish a new Asset Management Company to address these debts.
Household debt in Q2 2025 decreased slightly to 86.8% of GDP, marking the lowest level in 21 quarters. However, it remains above pre-COVID-19 levels, with financial institutions cautious about granting new loans due to declining retail loan quality.
Ms. Onfa Vejjajiva, Secretary-General of the NESDC, noted that the Bank of Thailand (BOT) launched initiatives to manage non-performing loans, but a lack of communication hindered debtor participation. She emphasized the need for improved public relations and monitoring of debt settlement programs, as well as extending assistance to non-bank financial institutions.
The NESDB also highlighted the potential benefits of increasing VAT, which currently stands at 7%, one of the lowest globally. A 1% increase could generate additional revenue equivalent to 0.5% of GDP, or approximately 93 billion baht, to fund essential programs like the Elderly Living Allowance and State Welfare Card Program.
Lessons from countries like Japan and Singapore show that VAT increases can support social welfare and infrastructure development. Implementing a gradual increase, with adequate public communication and support measures, can ensure a smooth transition and enhance government revenue, ultimately benefiting citizens through improved welfare services.
The NESDB underscores the importance of a comprehensive policy, transparent revenue use, and readiness of the collection system to achieve long-term fiscal sustainability.