THAILAND’S plan for higher spending with a proposed 3.19 trillion baht (S$127.3 billion) 2023 budget may bode well for contractors, CGS-CIMB said in a research report.

It noted that the government is looking to spend more on rail transport and logistics, which are likely to see a 22 per cent increase in budget to 131 billion baht in FY2023.

The bill, which is being debated in Parliament, estimates spending to be 2.7 per cent more than FY2022. The investment budget has been set at 695 billion baht, which is 14 per cent higher than the FY2022 budget.

However, the main issue for the FY2023 budget is whether it can be approved as support for the government in Parliament wanes, CGS-CIMB noted. That being said, the research team expects the bill to pass in the first reading, even in a worst-case scenario.

The budget is crucial to Prime Minister Prayuth Chan-ocha’s premiership as failing to clear the bill’s first reading could force him to resign or dissolve Parliament. The first reading will take place between May 31 and Jun 2.

“We believe that the opposition is concerned that the government may use funds from the central budget to boost its popularity as the latter’s term will expire in March 2023,” CGS-CIMB said in its report.

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As the government expects the budget deficit to be about 695 billion baht for FY2023, which is almost the same as FY2022, the research team projects that public debt will likely rise to 63 per cent of GDP at end-2022 and 65 per cent at end-2023, from 60.6 per cent as the end of the first quarter of 2022.

Although CGS-CIMB believes the market has priced in various macroeconomic headwinds, it has likely yet to factor in the risk of the budget bill being voted down. Nonetheless, the research team believes the risk of this happening is slim.

As such, it is reiterating its Stock Exchange of Thailand Index target of 1,750 points by end-2022, based on a FY2023 price-to-earnings ratio of 16.5 times, which is 1 standard deviation below the index’s 5-year historical mean.

The research team’s top picks are CP All, Central Pattana, MK Restaurant Group, Bangkok Bank, Kasikornbank, PTT Exploration & Production, Star Petroleum Refining, Thai Oil, Land And Houses, Advanced Info Service, Sino-Thai Eng & Construction and Ngern Tid Lor. It has “add” calls on all these counters.