A populist Thai political party leading efforts to form a government sought to allay central bank concerns that its pre-election pledges of billions of dollars in cash handouts will undermine the nation’s fiscal stability.
(Bloomberg) — A populist Thai political party leading efforts to form a government sought to allay central bank concerns that its pre-election pledges of billions of dollars in cash handouts will undermine the nation’s fiscal stability.
A government headed by Pheu Thai will ensure each baht spent by it contributes to fiscal stability in the long term, Deputy Secretary-General Paopoom Rojanasakul said in a statement Thursday. A promise to give 10,000 baht ($285) to each Thai citizen above 16 years will help “revitalize” the nation’s fragile economy, he said.
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Pheu Thai’s defense of its election pledges came a day after Bank of Thailand Governor Sethaput Suthiwartnarueput said the central bank was concerned about political risks and policies that could “undermine stability.” He urged parties to implement only those spending plans which have a clear funding arrangement.
“All Pheu Thai policies give utmost priority to fiscal stability,” Paopoom said. “Every baht we spend will have high returns and come back to support the fiscal stability over the long term.”
Pheu Thai, which campaigned around measures to fire up household income to counter high debt and cash injection to stimulate the economy, finished second in the May 14 general election. It’s now heading a coalition to form the next government with support from other parties.
Though Southeast Asia’s second-largest economy is poised to expand more than 3% this year due to a rebound in tourism and private consumption, it faces headwinds from sluggish global demand for its goods and rising borrowing costs. Investors are also concerned that the delay in government formation even after almost three months of the vote may push back state budget approvals and public spending.
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While the fledgling coalition has yet to spell out its policy priorities, Paopoom said it was necessary to implement its flagship digital wallet proposal of giving 10,000 baht that will cost a total of about 560 billion baht. The party had also previously pledged a 70% hike in minimum wage and tripling of farm profit to gradually boost economic growth rate to 5%.
Pheu Thai agrees with the central bank that urgent measures are needed to tackle household debt, which is now about 90% of the gross domestic product, Paopoom said. The party plans debt relief measures for Covid-hit farmers and small and medium enterprises, he said.
A Pheu Thai-led government will work with the central bank to ensure “a seamless coordination of fiscal and monetary policies” that will help tackle the economic crisis facing the country, Paopoom said.
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