THAILAND’S latest stimulus package may not be a cure-all for economic woes, private analysts have warned, as domestic demand joins export woes and a tourism slump as downside risks.
The Thai government moved on April 30 to offer tax goodies for spending on domestic tourism, homes and education, alongside fresh public welfare support for low-income workers.
Official estimates suggest that these measures, which largely run until June, could add 0.1 percentage point to Thailand’s full-year economic growth, which has been projected to come in at 3.8 per cent by official sources.
“While this may provide some support to private consumption, the impact will likely be small . . . and not sufficient to offset the weakness in exports,” wrote Maybank Kim Eng economists Lee Ju Ye and Chua Hak Bin.
Citi analyst Nalin Chutchotitham also said that “the expected lift to domestic demand could be more limited than thought”, especially as public welfare benefits - which make up about three-fifths of the roughly 22-trillion-baht package - will likely be spent on essentials “and less so on higher value-add services and products, such as restaurants and entertainment”.
She flagged falling household spending in 2018 as a drag on the economy, which she said could be due to a higher debt-to-income ratio.
But ANZ’s Krystal Tan and Sanjay Mathur added that curbs on car loans - an idea that the Bank of Thailand has been flirting with - “would exacerbate pressure on a sector that is already struggling with high inventories”.
“Fiscal spending has been a key driver of growth,” wrote Ms Tan and Mr Mathur. “But capital spending budget disbursement has been slower than expected, suggesting investment delays.”
Ms Nalin observed that the latest package, which targets private consumption, “does not have broad-based major investment schemes, like back in 2015, where R&D (research and development) and capital expenditure of all companies can receive bigger tax rebates”.
“Falling exports and slowing tourist arrivals are likely to continue into the second quarter as the US-China trade dispute remains unresolved,” said Ms Lee and Dr Chua, who cut their full-year growth forecast for 2019 to 3.6 per cent, from 3.8 per cent before.