Only infrastructure investment will effectively boost Thai economy: HSBC

Nalin Chutchotitham, the economist for the bank's Bangkok Branch, said in a note that she foresaw limited impact from the delayed election on the economy. Meanwhile, the package of short-term stimulus measures appears promising because most can be

implemented immediately to help low-income households and SMEs. 

"Nevertheless, we expect that a timely implementation of the long-awaited infrastructure spending remains key to lifting business sentiment and growth momentum in a sustainable fashion," she said.

The Finance Ministry expects the package, worth Bt136 billion, to boost the economy by Bt1.94 trillion based on the 9.7 times of multiplier effect.

Nalin noted that optimism should be exercised with caution since several measures, such as subsidised loans and enhanced credit guarantee measures, had been previously applied since June 2014. Boosting growth has not been easy so far, given sluggish exports, weak business confidence, and high household leverage. Furthermore, the Bank of Thailand's Senior Loan Officer Survey showed that the expected demand for credit in the third quarter was weaker than the previous two quarters, in line with its business sentiment survey that showed lower expectation for both domestic and export order books. Thus, a gradual recovery is more likely than a quick rebound over the coming months. 

She added that only a timely implementation of the Bt3.3 trillion infrastructure investmnnet would effectively lift business sentiment and growth momentum.

"Once public investment gathers momentum, private investment will likely follow (one obvious example is the increase of condominiums construction along the new mass transit routes). We have also noted in earlier reports that risks on the fiscal front is limited in the medium term with public debt-to-GDP (which is currently 43 per cent) projected to remain below the government's self-imposed fiscal sustainability framework at 60 per cent in 2022. Thus, it remains crucial for the government to continue to streamline regulatory processes and speed up its disbursement," she said.