Bangkok: Ekniti accelerates investment and prepares "Thai Helps Thai Plus" to alleviate the cost of living crisis. Deputy Prime Minister and Minister of Finance, Ekniti Nitithanpraphas, revealed that according to the National Economic and Social Development Council's (NESDC) overview of the Thai economy in the first quarter, it expanded at a rate of 2.8%, which is better than market expectations. The main driving force of the economy was nationwide investment, which grew by 9.9%. The most outstanding figure was private sector investment, which surged to 10.1%, marking the first time in 11 years that double-digit growth has been recorded.
According to Thai News Agency, this success reflects the fact that economic policies implemented before the war crisis, especially the Quick Big Win policy-short-term stimulus with long-term effects-are beginning to show clear results. Furthermore, removing restrictions through the BOI Fast Pass program has helped accelerate the flow of investment into the Thai economy, Mr. Ekniti said.
Mr. Ekniti further stated that these factors have led global credit rating agencies like Moody's to upgrade their outlook on Thailand to a more positive one, as they recognize the potential for recovery in private sector investment after a long period of lack of large-scale investment in Thailand. Meanwhile, the export sector continued to expand well in the first quarter, as businesses accelerated exports before the United States implemented Section 301 measures later in the year.
However, the Deputy Prime Minister assessed that the Q1 GDP growth figures were merely a reflection in the "rearview mirror," because looking ahead, the Thai economy still faces bumps and challenges. The first-quarter economic figures did not fully reflect the impact of the price war that erupted in March, as the government had intervened to cap diesel prices at 30 baht per liter at that time.
Mr. Santithar Sathienthai, Assistant Minister of Finance, added that Thailand and the world are currently facing several more economic storms, starting with the global energy crisis, which is expected to last at least another 1-2 years due to the disruption of the energy infrastructure, resulting in oil prices no longer remaining at low levels. Next is the inflation and cost of living crisis, which began to reflect in the overall inflation rate in April, rising to 2.9%. A worrying sign is that the Producer Price Index (PPI) started to turn positive, while the Consumer Price Index (CPI) remained negative in the first quarter. This indicates that businesses are bearing costs and having their profit margins squeezed. When businesses can no longer absorb these costs and have to pass those costs on to consumers, it will lead to a cost of living problem and difficulties in people's livelihoods.
"This situation will lead to a crisis on top of a crisis, where the cost of goods and the cost of living soar, but people's income and purchasing power decrease. If not addressed quickly, this could escalate into job losses in the future," Mr. Santithar said. The current inflation problem stems from rising costs (cost-push inflation), not from overheated demand or purchasing power. Therefore, aggressively raising interest rates may be difficult and could further exacerbate economic contraction.
Mr. Ekniti stated that in order to address the economic crisis, the government is preparing to propose the "Thai Helps Thai Plus" project to the Cabinet for consideration. This project will utilize 200 billion baht from the 400 billion baht borrowing limit granted under the Emergency Decree authorizing the Ministry of Finance. The project will employ a co-payment model, with the government contributing 60% and the public paying 40%, aiming to assist small retailers and small-scale individuals in society.
'This project is notable for its efficient distribution of funds to local communities. Based on similar projects in the past, it was found that spending was concentrated in Bangkok at only 15%, while the remaining 85% stimulated the grassroots economy nationwide, positively impacting SMEs as well.'
In addition to short-term remedies, the government aims to use funds from the emergency loan decree to restructure and address long-term problems by promoting energy transitions and cost reductions. Discussions are underway with the Ministry of Transport to encourage the conversion of tractor-trailer trucks to electric power, as well as to promote the increased use of B20 biodiesel, a blend of domestically produced palm oil. This approach is intended to create a permanent safety net, preventing the government from having to continuously subsidize diesel prices alone.
In the agricultural sector, which has been affected by rising chemical fertilizer prices driven by energy costs, the government is preparing a "fertilizer subsidy" measure to provide targeted assistance to farmers. In addition, the BOI board has approved investment promotion for the ASEAN potash mining project to produce fertilizer raw materials domestically, which will help reduce costs for farmers in the long term.
In the dimension of monetary and fiscal policy, the Deputy Prime Minister explained that fiscal space and fiscal policy are essential tools for maintaining the country's economic stability at this time. Regarding concerns about public debt, Mr. Ekniti stated that if the government does not inject funds to stimulate the economy and investment, the country's GDP will contract. This would mathematically cause the public debt-to-GDP ratio to automatically exceed 70%. However, with current policies, the public debt-to-GDP ratio is expected to remain below 68% this year and peak at 69% during 2028-2029, which is still within the manageable range.
The Deputy Prime Minister stated that this economic crisis is different from the past. Unlike the 1997 Tom Yum Kung crisis, which saw negative GDP growth, or the 2009 Hamburger crisis, which saw a collapse in exports, this crisis is a livelihood crisis. While the overall GDP figures may not look bad, the severity will be reflected in inflation and the burden of the cost of living for the people. Therefore, the government needs to accelerate relief policies while simultaneously maintaining investment engines to expand the country's long-term capabilities.