After enduring a political deadlock for over three months that deterred foreign investors, Thailand's main stock index fell by approximately 7%. With the establishment of a new cabinet, revitalizing the economy has become the top priority for the new Prime Minister, Srettha Thavisin.
On September 11, Thavisin addressed the parliament, emphasizing that economic stimulation would be the main focus of the new government. As short-term measures, the government plans to distribute 10,000 baht (equivalent to about 2,054 yuan) to its citizens, simplify visa procedures, and waive visa fees for certain countries. In the long run, Thailand aims to increase infrastructure investments, develop special economic zones, and advance free trade agreement negotiations.
This week, the new cabinet will discuss a temporary visa waiver for Chinese tourists. If approved, Thailand anticipates announcing the visa waiver for Chinese visitors before China's National Day on October 1.
In his Monday speech, Thavisin described Thailand as a "sick" nation, with household debt accounting for 90% of the GDP and public debt rising to 61% of the GDP. The recovery of the tourism sector and consumer spending has been sluggish, posing a risk of economic contraction.
Data released last month by the Thailand Economic and Social Development Committee showed that the country's Q2 economic growth was only 1.8%, significantly below the expected 3.1% and lower than Q1's 2.6%. A decline in exports and private investments, with exports contributing to 60% of Thailand's GDP, were the primary reasons for the slowdown.
Tourism contributes to 18% of Thailand's GDP. Last month, due to the delay in the formation of the new government, the country's tourism committee revised down the expected number of foreign tourists from 30 million to 28 million. With the decrease in tourist numbers, the tourism sector is projected to lose 100 billion baht in revenue.
Given the outlook for exports and tourism, the Thailand Economic and Social Development Committee has revised down its GDP growth forecast for the year from the previously predicted 2.7%-3.7% to 2.5%-3.0%.
Against this backdrop, Thavisin clarified that the new government's primary task is to "stimulate the economy and spending."
As a short-term measure, the Thai government plans to distribute 10,000 baht to every citizen's digital wallet aged 16 and above by February next year. Thavisin believes this initiative will not only stimulate economic activity but also generate revenue for the government.
The government also plans to address the debt issues of SMEs, farmers, and the general public, including allowing conditional debt deferment for farmers. On price control, Thavisin pledged that the new government would reduce gasoline, natural gas, and electricity costs and promote the use of clean energy.
During the lower house elections, Thavisin's party, the Phalang Pracharat Party, promised to raise the minimum wage. However, he did not mention this commitment in his Monday speech. But when questioned in parliament afterward, he indicated a "swift" adjustment to the minimum wage. Thavisin reiterated the new government's goal to increase Thailand's economic growth rate to an average of 5% over four years, with the minimum daily wage rising to 600 baht and a monthly salary of 25,000 baht for undergraduate degree holders.
Apart from stimulating domestic consumption, reviving the tourism sector is also a key short-term goal for Thavisin. The new Thai government plans to simplify visa application procedures, waive visa fees for certain countries, and provide a fast track for international conference attendees.
In attracting foreign tourists, Chinese tourists are a focal point for Thailand. Before the COVID-19 pandemic, about 30% of Thailand's international tourists were from China. Earlier this month, Thavisin proposed a temporary visa waiver for Chinese and Indian tourists during the peak tourist season, hoping to implement the waiver for Chinese tourists by China's National Day on October 1.
This week, the new cabinet will discuss the visa waiver policy. If approved by the cabinet, the temporary visa waiver for Chinese tourists is expected to last until the first quarter of next year, covering the Spring Festival holiday. Over the weekend, Thavisin urged cabinet members to seriously consider the visa waiver proposal, calling it a test of the new government's commitment to boosting the tourism sector.
Phuket's immigration department has already welcomed the visa waiver proposal. Most of Phuket's foreign tourists are from China. Last month, Phuket welcomed 300,000 foreign tourists, of which 60,000 were Chinese, the highest number among all countries.
However, the Thai Immigration Bureau expressed concerns about the visa waiver policy, noting that it could provide opportunities for telecom fraud, illegal operations, and transnational criminal groups, making it easier for lawbreakers to enter Thailand. The bureau also worries that a large influx of visa-free tourists will exacerbate congestion at border checkpoints, and the entry of more illegal organization members will significantly increase the workload of the immigration bureau.
A spokesperson for the Thai Raksa Chart Party called on the government and the Tourism Authority of Thailand to take action to restore Thailand's tourism image and alleviate foreign tourists' concerns about safety in Thailand. The party warned that if concerns about safety are not addressed, even the introduction of a visa waiver policy will have limited effects.
Data from the Ministry of Tourism and Sports showed that from January 1 to August 27 this year, a total of 17.6 million foreign tourists entered Thailand. However, unlike previous years, the largest number of tourists entering Thailand was not from China but from Malaysia, exceeding 2.797 million. Chinese tourists were about 2.182 million, ranking second, followed by South Korea (1.046 million), India (1.007 million), and Russia (915,000).
In addition to boosting tourism and other short-term goals, the new Thai government also plans to increase investments in various transportation infrastructures, develop special economic zones in four major regions, and establish funds for startup investments.
Internationally, Thailand will accelerate negotiations on free trade agreements with various countries. Next week, a Thai delegation will travel to Belgium to start free trade agreement negotiations with the EU, aiming to reach an agreement within two years.
On domestic reforms, the Thai government seeks to change the conscription system to a voluntary service system starting next year and reduce the number of senior commissioned officers. Thavisin also promised to draft a more democratic constitution, but the amendments will not touch the royal powers.
Regarding Thavisin's policy speech, Thai securities firm ASL Securities believes that Thavisin did not specify the government's budget allocation in various fields or clarify the implementation time of related measures, especially the specific time of the 10,000 baht distribution.
The firm believes that many of the new government's policies will stimulate speculative activities in multiple sectors, but implementing the related policies will not be easy. In the long run, some policies may even have a negative impact on Thailand's fiscal situation.
On the day the policy was announced, the Stock Exchange of Thailand index closed down 0.40%.
Last week, a survey by the Federation of Thai Capital Market Organizations showed that investor confidence in August rose by 69.3% compared to July, reaching a seven-month high, due to the finalization of the new Thai government. Among them, foreign investor confidence soared by 87.5% compared to July.
So far this year, the Stock Exchange of Thailand's benchmark index has fallen by 7%, and foreign investors have sold Thai stocks worth $3.9 billion. The Federation of Thai Capital Market Organizations expects that with the new government taking office, more foreign funds will flow back into Thailand.
