Thailand’s Economic Challenges and Sustainable Development Goals
Thailand is currently facing significant economic challenges that require immediate attention. The government needs 560 billion baht to fund its cash handout program, while the country needs at least 420 billion baht to prevent the economy from collapsing in the fourth quarter. These challenges highlight the importance of addressing the Sustainable Development Goals (SDGs) to ensure a sustainable and inclusive recovery.
The Need for Financial Support
- The government requires 560 billion baht to finance its cash handout program next year.
- The country needs at least 420 billion baht to prevent the economy from collapsing in the fourth quarter.
However, the financing of the cash handout program is currently impossible due to a lack of liquidity. The government has reportedly approached the Bank of Thailand (BoT) to purchase bonds from commercial banks’ government bond holdings, creating free cash at banks. This free cash could then be used to finance the program. Unfortunately, the BoT declined this request as commercial banks need their government bond holdings to provide reserves for possible non-performing loans (NPLs). Reducing these holdings could pose a risk to Thailand’s banking system.
Economic Growth Projections
- The Bank of Thailand estimates GDP growth to be 2.8% in 2023 and 4.4% in 2024.
- The Fiscal Policy Office at the Ministry of Finance projects GDP growth of 2.7% for this year and 3.2% for next year.
However, it is important to approach these growth projections with caution. Last year, the Fiscal Policy Office estimated 2022 growth to be 3.4% and projected 2023 growth of 3.8%. The actual GDP growth for 2022 was 2.6%, and the 2023 growth has been downwardly revised to 2.7%. Therefore, it is crucial to consider alternative perspectives on economic growth.
An Alternative Approach
Instead of relying solely on conventional econometric models, an alternative approach based on Milton Friedman’s optimal quantity of money method can provide valuable insights. This approach emphasizes the role of money supply growth as the main determinant of economic growth.
- Money supply growth of 3.3% in Q1/2023 would result in 2.6% real GDP growth.
- Money supply growth of 2.0% in Q2/2023 would yield 1.8% real GDP growth.
It is important to note that inflationary differences between quarters can impact the relationship between money supply growth and GDP growth. For example, a 2.0% money supply growth in Q2 may not result in the same level of GDP growth as in Q1 due to inflationary factors.
The Importance of Accurate Data
Accurate data is crucial for making informed decisions and projections. However, there have been concerns about the manipulation of data in Thailand. For instance, the recent release of liquidity data by the Bank of Thailand raised suspicions as it reflected a higher level of domestic liquidity due to a reported capital inflow. This raises questions about the transparency and reliability of economic data.
The Challenges Ahead
The final quarter of this year poses significant challenges for Thailand’s economy. Without any capital outflows, money supply growth would be flat, resulting in minimal GDP growth. However, if capital outflows continue, Thailand’s Q4/2023 GDP growth could be negative. To achieve positive GDP growth, a substantial capital inflow of $13.7 billion is required. This would require foreign borrowing to support economic growth.
Conclusion
Thailand’s economic challenges highlight the importance of addressing the Sustainable Development Goals (SDGs) to ensure a sustainable and inclusive recovery. Financial support, accurate data, and alternative approaches to economic analysis are essential in navigating these challenges and achieving long-term economic stability.
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