Four key factors, Biden’s policies will shape Thai economy this year: state think-tank chief

In an exclusive interview with Krungthep Turakij newspaper, NESDC secretary-general Danucha Pichayanan said that though some countries have started mass vaccinations, it will still take a long time for inoculations to arrive in every corner of the world. 

And while Thailand waits for vaccines to arrive, the renewed outbreak could worsen and hit the economy hard. 

The new round of infections originated in Samut Sakhon province to the west of Bangkok, and spread quickly, forcing authorities to impose restrictions on 28 provinces. 

He said if the virus can be contained by early February, then the government will not have to change its economic management plans and should be able to announce relief packages in the next few weeks. 

He added that so far, this new outbreak has not had as severe an impact on the economy as the first round of infections did last year. This is because many economic activities have been conducted to some extent, like people moving around and restaurants remaining open, he said. 

Also, he added, Thailand is better prepared this time around and has ensured there is adequate supply of face masks, medical equipment and medication. 

“Managing the economy in the first six months of this year is being challenged by the new outbreak. We have to contain it and ensure everyone’s safety first before we can drive the economy forward. And if we are successful in containing the outbreak, then we will draw more foreign investment,” he said. 

However, he said, apart from Covid-19, there are more risks that need to be managed. 

The first is ensuring people keep their jobs and for this we have to help bolster businesses while the economy gradually recovers from the Covid-19 fallout, he said. 

The second is high household debt, which currently stands at 83 per cent of the gross domestic product. The country must address both short- and long-term issues related to debt, and ensure people are financially literate. 

The third is the appreciation of the baht, which has had an adverse impact on exports. A drop in the import of capital goods and limited overseas investments by Thai corporations have contributed to the strength of the baht. We need to ensure the stronger baht does not disrupt economic recovery, he said. 

Another important factor is US President-elect Joe Biden’s policies once he takes over from President Donald Trump on January 20. Thailand has to wait and see which direction Biden’s policies take. For instance, he said, the US-China trade war is expected to continue and Biden may come up with policies that have an impact on Thailand and the global economy. 

The government also needs to focus on the low-income group in the first half of 2021 and find ways to boost domestic consumption. Also, he said, the economy will rely on private investment and public spending, such as Bt400 billion in government loans aimed to lift the grassroots economy in the first six months. 

“In a move to sustain economic growth, the Government Centre for Economic Situation Administration will also boost foreign direct investment, which we expect will flow into the country in the fourth quarter of the year,” he said. 

The country plans to restructure the economy so it has a stronger base for the next four to five years, and in order to do this, investment is required in key industries such as electric vehicles, battery, charging stations, electrical grids and electric systems, sensors and electronics. 

If Thailand wants to achieve its aspiration of becoming a medical hub, then it also needs to invest in human capital and develop research centres. 

The Board of Investment (BoI) also needs to adapt its strategy so it draws investment from the world’s top five or 10 firms. 

Government agencies and BoI have discussed the options of investment incentives and technology transfer, which should draw more investment in the fourth quarter. This will lead to a new industry cluster and a production base in the long-term, he said. 

If Thailand manages to effectively contain the spread of the virus, the economy should grow 4 per cent this year, he said, citing NESDC’s forecast. 

“The Covid-induced crisis has also created an opportunity for economic restructuring, which can become a springboard for robust future growth,” he added.