The Thai banking community is worried about the populist policies of the new coalition government, led by the Forward Party, which could lead to a widening budget deficit.
The Kasikornbank think tank said that populist economic policies working to win votes would require large financial outlays to implement.
He noted that while these policies would have a short-term positive effect on Thailand's GDP, they could also lead to a large financial burden in the long term. This is because financing these policy decisions will require either a redistribution of the budget, which may not be sufficient, or an attempt to increase government revenue through taxation. He warned that raising taxes now may not be wise as the economy is still recovering from the crisis caused by the COVID-19 pandemic.
The think tank also added that the new government is unlikely to avoid an increase in the budget deficit, which will lead to an increase in the policy interest rate. In addition, he noted that if the budget deficit increases, it could affect the private sector in Thailand.
The economic analysis center (EIC) of the Siam Commercial Bank (SCB) said that the results of the May 14 elections are of key importance for how the Thai economy will develop.
However, the EIC believes that the elections and the transitional government will not have a significant impact on the country, at least until the end of the third quarter.
