The Government’s Inflation Woes

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The leader of the Thai Pakdee Party, Warong Dechgitvigrom, recently posted a photo of himself at a gas station in Australia. “Gas prices in Australia are not cheap,” he said. “In Thailand, the government is still helping reduce the price.” 

Netizens swamped his post, pointing out that even if gas prices are higher in Australia, an Australian worker makes more in an hour than a Thai worker does in a day on minimum wage. Warong later edited his post to respond, saying that people are not supposed to compares wages or income with gas prices.

This episode encapsulates the difficulties facing the Prayut administration. A rising cost of living, driven by global conditions such as increased gas prices, is plaguing governments all over the world. Russia’s invasion of Ukraine has proven to be the catalyst of an economic headache for which Thailand’s prime minister cannot be blamed. 

Voters, however, are unlikely to be sympathetic; global comparisons do not help. Joe Biden’s approval ratings are at the lowest point in his presidency, even as he explains to voters that they are experiencing “Putin’s price hike”; Boris Johnson is not doing much better. Perhaps only Kishida Fumio is seeing his favorability at a record high. 

But that may have a lot to do with the fact that there are few viable alternatives in the public eye to Kishida in Japan, and unfortunately for Prayut, there are plenty of high-profile politicians who wish to be prime minister in Thailand. In March, Prayut was outpolled by the Move Forward Party’s Pita Limjaroenrat in a NIDA survey on voter support for potential candidates for premier. This followed a consistent decline in his favorability ratings over the past couple of quarters.

One suspects that Prayut’s stock will not rise in the next poll as Thais continue to feel their pockets squeezed. With a general election due next year at the latest, this is hardly what the prime minister wants at this juncture. 

The government is trying to put a brave face even as the economic news worsens. The finance minister, Arkhom Termpittayapaisith, recently assured the nation that Thailand is not at risk of stagflation: when economic growth slows while inflation is high. 

But the economic picture is simply not pretty. Even after GDP shrank by double digits during the coronavirus pandemic, the recovery has been tepid at best, with the government cutting its growth forecast this year to only 2.5-3.5%. Thailand’s economic drivers are not back at full strength; the tourism sector, for example, remains hampered by a China still zealously pursuing a zero-COVID strategy. 

Inflation, meanwhile, is simply far more than tepid; it has now soared to a 13-year high. The government, however, is running out of tools in its arsenal with which to respond.

The Oil Fuel Fund, which helps to subsidize fuel prices, is now 85 billion baht in the red. KLA Party leader Korn Chatikavanij recently pointed out that the oil refining margin has increased significantly over the past year, further burdening both consumers and putting the Oil Fuel Fund at further risk, meaning the government should step in and place a price ceiling on this margin. Prayut responded that the government can only ask for cooperation from the refineries.

Meanwhile, the Commerce Minister, Jurin Laksanawisit, denied a request from the producers of Thailand’s ubiquitous Mama instant noodles. (Instant noodle prices are currently controlled by the ministry.) While insisting that he feels sympathy for producers facing higher costs, Jurin asked they retain the current price for as long as possible. He noted, however, that eventually he may have to relent and permit a price increase: “Having expensive products in the market is better than shortages.”

To add to the government’s woes, the immensely popular Khon La Krueng (‘half and half’) scheme is not being continued after the Ministry of Finance said that the scheme is too expensive and inappropriate for this period of economic recovery. 

As the name suggests, the program had allowed consumers who sign up to pay only half the price of eligible products at eligible SME shops, with the government subsidizing the other half of the cost. It had been devised to help struggling shops attract customers during the pandemic, but its understandable popularity meant the scheme had been continued again and again. Indeed, it has emerged as one of the government’s signature achievements. Coalition partners bickered publicly while campaigning over who should get credit for it; Palang Pracharath candidates held signs with “Khon La Krueng” written on them as they canvassed for votes. 

Yet the Khon La Krueng program’s demise illustrates the government’s conundrum well. That the government had to borrow and spend to protect livelihoods during lockdown was reasonable. But how fiscally stringent will Prayut be now that the worst of the pandemic is over? Deputy Prime Minister Supattanapong Punmeechaow has already said that the government is ready to borrow again if necessary. But many eyes will also be watching the grim numbers. Since the pandemic started, Thailand’s public debt soared from 41% to 61% of GDP, with the debt limit raised to 70% in 2021.

Thitinan Pongsudhirak wrote last year that under Prayut, “a huge debt load was piling up well before the pandemic arrived in early 2020…the Prayut government has been overspending year in and year out without clear prospects for economic growth and increased revenue on the horizon.” 

The government may soon have to overspend again, to save both the people from an ever-growing economic burden that shows no sign of ceasing, and their own popularity as they prepare to face the next election.

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