PM & Government In Place, Now For The Economy

On Tuesday Thailand’s parliament approved Pheu Thai PM nominee Srettha to be the country’s next PM and he will lead a government consisting of 11 parties which doesn’t include the election winners Move Forward. Now that the political impasse that has existed since the May 14 elections seems to be over, the focus is now shifting to policy and the economy. Q2 GDP slowed to only 1.8% y/y from 2.6% in Q1, the slowest in ASEAN ex Singapore.

• Srettha received 482 votes out of the 728 members present in the joint sitting of parliament. Most of the 164 votes against him came from Move Forward MPs who wouldn’t support him because of Pheu Thai’s alliance with the military-backed UTN and PPRP. This coalition is also causing division within Pheu Thai as it breaks an election promise and risks alienating supporters but is being interpreted as unification against what is seen as the common enemy reformist Move Forward, according to the Bangkok Post.
• In the election campaign Pheu Thai promised fiscal stimulus to boost the economic recovery including a “digital wallet” giving all over 16s THB 10k, a 70% increase in the minimum wage, income guarantee and tripling farm profits. The goal is to increase growth to 5%, which hasn’t been achieved since 2012. The measures are likely to begin from October 1, according to Bloomberg. Pheu Thai will likely be keen to implement its election promises given its broken commitment re cooperating with the military-backed parties.
• While there have been questions around how the election promises will be funded, the Bank of Thailand has also stated that fiscal stimulus is an upside inflation risk. It cited downside risks to growth from China too.