The Illusion of Quick Wins in Economic Policy
In today’s political landscape, governments often sound more like movie studios than governing bodies. They craft catchy slogans for their policies, hoping to capture public attention and support. For instance, former U.S. President Donald Trump’s “Big Beautiful Bill” was essentially a tax cut that would result in a $3.3 trillion budget deficit over the next decade. To fund this, he imposed reciprocal tariffs on global trade, reigniting a trade war that many thought had ended. This move led to a 100% extra tariff on Chinese products, further complicating international economic relations.
Similarly, the current four-month government in Thailand introduced its own slogan: “Quick Big Win.” However, this phrase doesn’t align with economic realities. In economics, nothing is truly quick, especially when dealing with complex structural issues.
Budget Constraints and Fiscal Challenges
The current government is constrained by the 2026 budget, which has already been passed into law. This means that funds allocated for specific programs cannot be redirected, even if the government disagrees with those allocations. For example, the previous administration allocated 4 billion baht for soft power initiatives. If the current government believes these programs are ineffective, the money will remain unused, leading to wasted resources.
Moreover, the fiscal budget is approved for use over 12 months. If certain programs, such as the “Khon La Khrueng Plus” or Half-Half Plus Co-payment scheme, are implemented early, it leaves fewer tools available to stimulate the economy later in the year. This front-loading can limit the government’s ability to respond to future economic challenges.
Evaluating the Half-Half Plus Scheme
Many people, including some economists, believe the Half-Half Plus scheme could effectively stimulate the economy by supporting small businesses. However, a study conducted by a Chulalongkorn University associate professor revealed otherwise. The research focused on the impact of a similar scheme under former Prime Minister Prayut Chan-o-cha and found that:
- The scheme did not lead to increased overall spending.
- The multiplier effect was only 0.4 times.
While participating businesses saw a 60% increase in sales, non-participating businesses experienced lower sales. This shift in spending merely redistributed funds rather than boosting total economic activity. As a result, overall spending growth remained flat.
The effectiveness of the scheme was comparable to other income transfer programs, such as Pheu Thai’s 10,000 baht cash handout. For every 100 baht disbursed, the Thai economy only benefited by 40 baht. Therefore, a 44 billion baht budget for the scheme would only raise quarterly GDP growth by 0.4%, which is not a significant impact.
The Hidden Costs of Consumption-Driven Schemes
The remaining 60 baht from each 100 baht disbursed goes to importers, as Thailand imports goods and services that account for over 60% of GDP. Consumption-driven schemes are inherently flawed because they allow a large portion of the money to flow out of the country. This raises concerns about the long-term sustainability of such policies.
The prime minister hinted at more schemes like this in the future, but this approach does not seem promising. Government spending is limited by the 2026 fiscal budget, meaning that increasing one program’s funding often comes at the expense of others. It is essentially a zero-sum game.
The Need for Long-Term Economic Strategy
Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas argued that the stimulus policy is necessary due to projected GDP growth of as low as 0.3% in Q4/2025. The 66 billion baht stimulus (22 billion baht for welfare card holders and 44 billion baht for the Half-Half Plus scheme) would lift final quarter GDP growth by 0.6%. However, this move raises questions about the long-term implications.
If the minister spends 66 billion baht in Q4, what about Q1/2026? With the renewed trade war between the U.S. and China, the situation could worsen. The Bank of Thailand estimates that Thai GDP growth for 2026 will only be 1.6%, a drop from 2.2% in 2025.
A Call for Caution and Structural Reform
Actual revenue collection for the 2025 fiscal year is already 37 billion baht short of estimates. With 1.6% projected growth for next year, there is a good chance that revenue collection could fall 100 billion baht below estimates. The government is advised to adopt a conservative approach, especially given the uncertainty caused by ongoing floods.
Due to budget constraints, the government cannot use the term “BIG,” and “QUICK” is also inappropriate. Nothing in Thailand can be done quickly, as the country faces structural economic problems. Handing out money may provide short-term relief, but it does not address the root causes of the issues.
Addressing the Four Traps
Mr. Ekniti pointed out that the Thai economy faces four traps that hinder development: an investment trap, a population ageing trap, a technology trap, and a debt trap. These challenges require long-term solutions rather than quick fixes.
Thailand’s investment to GDP ratio is currently around 20%, far below the 30% needed to pull the economy out of the investment trap. While some argue that the normal investment level is 25%, the high 40% figures were from before the 1997 economic crisis, which was driven by excessive real estate investment.
To overcome these challenges, Thailand needs to invest around 30% of GDP, similar to Vietnam. This would help eliminate the investment trap and improve overall economic performance.
The Role of Sovereign Wealth Funds
Economists suggest using the Sovereign Wealth Fund (SWF) to address these issues. With foreign reserves of nearly 9 trillion baht, Thailand could allocate a portion of these funds to domestic development projects. Investing one-third of the reserves (around 3 trillion baht) in Thai development could tackle the investment, debt, and technology traps simultaneously.
However, I am strongly against setting up an SWF using foreign reserves. I plan to write an article explaining my stance in detail.
A Vision for Sustainable Growth
Thailand does not need quick wins. We need SLOW, SMALL, LONG-TERM WINs. The focus should be on sustainable growth that lasts beyond a single election cycle. Only then can we truly address the structural challenges facing the economy.
