“Government stimulus package for Thai economy is unsustainable”

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Anusorn Tamajai, an economist from Rangsit University, says he expects the proposed package to make little difference and has declared it unsustainable.

The package, which should be approved this week, is worth 370 billion baht and includes cash handouts for farmers and low-income earners, grants for children, incentives for domestic travelers, and tax incentives for small businesses.

It’s hoped to stimulate the economy by 3%, in the wake of domestic uncertainty and the ongoing US-China trade war. Last week, the Finance Minister said the aim of the package was to prevent growth sliding below 3% in 2019.

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However, economist Anusorn Tamajai has his doubts.

“Short-term spending as part of populist policies will not help much, as the Thai economy is monopolised by big business.”

He adds that most spending by low-income groups will end up as revenue for large businesses. However, he agrees with the plan to reduce the tax burden for small and medium-sized enterprises, which could lead to more private investment.

The government plans to offer generous tax reductions for those who import machinery to upgrade their production with a five-year depreciation allowance. The state-run Government Savings Bank and Krung Thai Bank will also provide combined soft loans worth about 100 billion baht.

The government also plans to direct a number of other state-run banks to provide soft loans to farmers and lower income groups, which Anusorn warns may not be sustainable as its effectiveness relies on public confidence in the future.

Thai governments often resort to state-run bank lending, quasi-fiscal measures that usually increase the burden for banks but translate into a burden for tax payers later.

SOURCE: The Nation

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