Public spending continues to grow
According to the recently released November monthly report on Economic and Monetary Conditions published by the Bank of Thailand, public spending continued to rise. The central bank noted that excluding transfers, public spending increased in November mainly due to steps taken to increase the efficiency of disbursement.
Meanwhile, capital spending saw an increase because of transportation projects.
In March 2016, the Thai government had announced 20 large transportation infrastructure projects and had planned to spend close to 1.8 trillion baht($50.8 billion) on them by 2022. Railways lay at the heart of that plan. Given the relatively poor state of transportation infrastructure in Thailand, spending on the sector is crucial to improve the perception about the nation as well as its competitiveness and business-friendliness.
Apart from transportation projects, compensation expenses for land expropriation spent by the Department of Highways was also responsible for the rise in overall government spending.
Private spending and investment
Private spending, or consumption, in Thailand contracted for the second successive month in November. This was due to a decline in Thai travelers and lackluster demand for consumer goods. The Bank of Thailand noted that “supporting factors for overall consumption remained soft.”
Meanwhile, though private investment remained in contraction mode in November, it showed some improvement vis-à-vis the previous month. One of the segments in which private investment improved was alternative energy. The sector benefitted due to support from the government and was reflected in increased imported capital goods.
Impact on the economy
Government spending adds to economic output and is an important input for emerging nations where private sector consumption is still maturing.
At the same time, consumer spending has come under the spotlight due to its increased role in economic output in light of decreased external demand.
Investors in Thailand (THD) should monitor consumer demand trends closely in order to assess the extent to which the country can grow from within.
In the next article, let’s look at some indicators which feed into economic stability and how they fared in November.