Bangkok: Associate Professor Dr. Somchai Pakphasanwiwat has raised concerns regarding the Thai government's proposal to borrow 500 billion baht, cautioning that this course of action should be considered only as a "last resort." Dr. Somchai, an expert in political economy, discussed the implications during an interview on "Share the News" aired on MCOT News FM 100.5, highlighting the looming public debt crisis that is nearing a 70% ceiling, prompting considerations to expand the debt limit.
According to Thai News Agency, Dr. Somchai pointed out that the current global economic climate, particularly the Middle East crisis, could significantly elevate oil prices, thereby impacting global economic growth. The International Monetary Fund (IMF) has projected that this could constrain Thailand's economic growth to a mere 1.2%, while inflation rates could surpass 2%, potentially leading to stagflation. This scenario reflects economic stagnation coupled with high inflation, posing significant risks even if it does not culminate in a recession.
Dr. Somchai emphasized the urgent need for the government to stabilize the cost of living, specifically in areas such as energy, food, and fertilizer. He critiqued previous populist policies like the "half-half" scheme, which, he argued, depleted financial resources and exacerbated the public debt, thereby limiting fiscal flexibility. He suggested that the government should focus on reducing expenses by cutting unnecessary budgets and revisiting certain policies, allowing energy prices to reflect actual costs.
The proposal also involves targeting financial aid towards vulnerable groups such as public transport users and farmers. Additionally, Dr. Somchai stressed the importance of increasing national income by accelerating tourism, boosting exports, and exploring new markets in regions like the Middle East and Latin America.
Dr. Somchai further highlighted the necessity to expedite the investment pipeline, noting that Board of Investment (BOI) applications have reached 1 trillion baht. He indicated that advancing stalled projects worth 400 billion baht could provide immediate economic stimulation, along with encouraging the disbursement of government investment budgets to foster private sector collaboration.
He also called for a comprehensive economic restructuring, concentrating on sectors where Thailand has the potential to excel, such as food, agriculture, health, and tourism. Embracing AI technology could enhance competitiveness, while small and medium enterprises (SMEs) must focus on improving product quality rather than relying on interest rate reductions or debt moratoriums.
As a measure to stimulate the economy, Dr. Somchai proposed a "Half-Half Plus" scheme, which would include mandatory upskilling and integrating businesses into the tax system to shrink the informal economy. This approach could potentially reduce the necessity for borrowing.
Moody's recent revision of Thailand's credit outlook to "negative" underscores the urgency of having a clear revenue-generating plan. Dr. Somchai cautioned that borrowing, in the absence of tangible results, could lead to a credit rating downgrade, thereby aggravating the existing economic and debt issues.
In conclusion, Dr. Somchai underscored that if borrowing becomes unavoidable, the focus should be on effectively utilizing the borrowed funds to genuinely revive the economy, rather than on the act of borrowing itself.