Economic populism takes center-stage in upcoming election

Thailand is preparing itself for a general election this month, and bread-and-butter issues — such as minimum wage, farm subsidies and welfare — will be top of voters’ minds.

Southeast Asia’s second-largest economy is still recovering from the Covid-19 pandemic — though tourism has revived and unemployment is below 1%, the country faces a slew of problems. Energy and electricity bills are high; the number of employers is still below pre-pandemic levels; household debt levels are rising at an alarming pace; and annual per-capita income growth has been falling since 2018.

That’s why most political parties are focusing their campaigns on giveaways like subsidies and tax exemptions — populist pledges that economists fear will derail the nation’s fiscal balance.

Contenders can be divided into two categories: parties that support the pro-military establishment and a pro-democracy camp of opposition factions.

In the former group are the newly minted, conservative United Thai Nation Party, helmed by Prime Minister General Prayut Chan-o-cha; the Democrat Party (Thailand’s oldest conservative faction); and the military-backed ruling Palang Pracharath Party. The second group consists of the social democratic Pheu Thai, led by former leader Thaksin Shinawatra’s daughter Paetongtarn Shinawatra; the progressive Move Forward Party; and Bhumjaithai, a pro-democracy but also a pro-monarchy outfit.

Experts widely agree that pro-democracy groups are expected to perform strongly in light of deep-seated discontent with the current military-affiliated administration. Ultimately, whoever wins will still need to be endorsed by the monarchy-military alliance, which activists say darkens the prospect of a free and fair election.

Despite his weak standing, Prayut’s return as prime minister cannot be ruled out, Syetarn Hansakul, an analyst at the Economist Intelligence Unit, told CNBC.

“He can count on the support from the senate vote (250 in total) and the support of other allied parties,” she said. “If Prayut proceeds to be confirmed as prime minister by the new parliament, without the democratic mandate but with the help of the appointed senate, that could lead to a return of street protests.”

“Thailand’s election outcome remains very fluid, and could turn out differently from the opinion polls, in our view,” DBS economists said in a recent report. “There could be delays in forming the new government due to the prolonged time needed to agree on a coalition, hindering policymaking,” they warned.

Parties are promising various handouts to appeal to voters.

United Thai Nation wants to raise farm subsidies and increase monthly allowance for state welfare cardholders and the elderly. Pheu Thai aims to boost minimum wage to 600 baht ($17.60) per day (from the current highest level of 354 baht), triple farmers’ income by 2027 and offer a one-time handout of 10,000 baht in digital money. Move Forward wants to increase daily minimum wage to 450 baht a day and expand welfare benefits. And Bhumjaithai seeks a three-year debt moratorium for farmers, free solar panels and free life insurance for those aged over 60.

Few details have been provided about funding, worrying economists who say those policies would weigh on already stretched public finances after significant fiscal support during the pandemic. Public debt has exceeded 60% of gross domestic product since the 2022 fiscal year and is expected to tick up in 2023, Coface warned in a report.

A recent analysis by New Delhi think tank Observer Research Foundation described populist pledges as “a temporary band-aid solution that will provide limited respite to the debt-ridden citizens without incentivizing them to become self-reliant.” The comment refers to household debt, which stood at 86.8% of GDP as of late 2022.

Given the tight fiscal room, DBS expects it will be “difficult” for the newly elected government to fully fulfill its promises. Moreover, any post-election demonstrations are likely to further hurt economic activity and investor confidence.

Under Prayut’s reign, protests erupted from 2020 through 2021 amid calls for reforms to the monarchy, particularly the country’s infamous lèse-majesté law. Only the Move Forward party has campaigned on changing the defamation law, while Pheu Thai previously said it will consider discussing it in Parliament.

Realistically, though, unless Move Forward ends up leading the government — an unlikely scenario to political observers — laws related to the monarchy aren’t expected to be on the new prime minister’s agenda.

The recent protests resurfaced issues of social justice and income disparities — a topic that the new government can’t ignore, said the EIU’s Hansakul. The next leader will be called upon “to create a fairer playing field that allows small and medium-sized businesses to compete better, to expand social safety nets for the public, to improve the quality of the education and enable the labor force to meet the challenges of a more technological-driven world,” she said.

Cannabis regulation is another pressing matter for the next administration. In 2022, Thailand decriminalized the cultivation and licensed sale of marijuana for medicinal use, but many politicians want to roll back that rule. Pheu Thai plans to restrict the use of the plant to medical and research purposes, while Move Forward wants the herb to be treated as a narcotic drug. Only the Bhumjaithai Party seems intent on growing the market.

When asked what the chances are of marijuana being re-criminalized, Viroj NaRanong, a research director focused on health economics and agriculture at Thailand Development Research Institute, said it’s possible but unlikely.

“The current discourse employed by almost every major party is medicinal cannabis, the main difference would be how lenient each government would apply in its governance,” he said.

Even if the ultra-conservative United Thai Nation Party wins, it would be unable to form a coalition government without Bhumjaithai Party, he added, explaining that United Thai Nation would have to tolerate the latter’s flagship policy on cannabis promotion, just as it’s been doing in the current government.