Thai Senate clears 3.78 trillion baht budget as parties scramble to form government

[BANGKOK] Thailand’s Senate approved a 3.78 trillion baht (S$150.4 billion) annual budget, offering relief to investors concerned about political uncertainty following the sacking of Paetongtarn Shinawatra as prime minister last week.

The spending plan for the fiscal year starting Oct 1 was backed by 148 members in the 200-member Senate on Tuesday (Sep 2). The House of Representatives passed the Bill last month, and it now awaits royal endorsement.

The budget outlay – about one-fifth of Thailand’s US$550 billion economy – is seen as crucial to offsetting the impact of higher US tariffs and a downturn in the key tourism sector.

The plan is slightly higher from a year ago and projects a deficit of 860 billion baht, or 4.3 per cent of gross domestic product.

Political turmoil

The Senate nod for the budget came days after the country was plunged into political turmoil following Paetongtarn’s removal by the Constitutional Court for ethical misconduct – the second leader to be ousted in just over a year.

The ouster has set off a race between two rival blocs to form a government, with neither holding a parliamentary majority. The People’s Party, a pro-democracy group controlling nearly a third of the 500-seat House of Representatives, has emerged as pivotal in breaking the deadlock.

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Fitch Ratings said on Tuesday that Thai leadership changes underscore the potential for political volatility and raise uncertainty about medium-term policies, including structural reform agenda and fiscal consolidation.

Moody’s, which cut Thailand’s sovereign outlook to negative from stable in April, said repeated upheavals have eroded growth potential and weakened fiscal metrics.

Thailand’s top planning agency expects growth to average 2 per cent this year, less than half the pace of expansion of regional peers such as Indonesia and the Philippines.