Thailand has been playing by the rules and getting little benefit from obeying economic orthodoxy. A reshuffle among top policymakers after a string of departures, just as the nation emerges from coronavirus hibernation, is an opportunity to be bolder. The conservative nature of military-backed rule suggests tinkering is the more likely outcome than an embrace of bigger change.

Stagnating even before the pandemic hit, Southeast Asia’s second-largest economy will shrink 8.1 percent this year, the central bank projects. That’s four times the contraction the International Monetary Fund has penciled in for the region as a whole.

Thailand has contained its outbreak, with no new local infections since May. Restrictions are slowly lifting. However, spillover effects from elsewhere are being felt. Industrial production fell by almost a quarter in May as the automotive sector hit the brakes. International arrivals have all but ceased, a heavy blow when tourism accounts for up to an estimated fifth of gross domestic product.

For all the damage, officials have been conservative to a fault. Interest rates are approaching zero, but haven’t gone negative. The Bank of Thailand has bought some government bonds, yet balked at the large-scale debt monetization pursued by Indonesia. Prime Minister Prayuth Chan-ocha’s government has pulled together a stimulus package of 1.9 trillion baht of soft loans, social relief and bond liquidity support, or roughly $60 billion -- a record sum, though disbursement remains opaque.

Messy coalition politics have presented an opportunity for course correction. The trigger was Finance Minister Uttama Savanayana’s recent departure from leadership of the largest party within the ruling military-backed alliance. As a consequence, Uttama will exit the Cabinet along with several of his allies. Somkid Jatusripitak, a veteran economic adviser and deputy prime minister, is leaving, as are ministers for energy and higher education.

Labor Minister Chatumongol Sonakul, from another group, is also headed for the exit. Party allegiances will dictate most appointments. Still, ministerial intrigue shouldn’t obscure the moment’s economic potential. It’s all happening as the search for a new central bank chief enters its final stages. Bank of Thailand Gov. Veerathai Santiprabhob said in May he won’t seek a second five-year term, citing family reasons. His vacancy isn’t related to the political machinations, but it’s unusual that a new governor and minister are needed at the same time.

Prayuth, a former army chief who led a coup six years ago, isn’t an obvious agent of dramatic economic change. He had plenty of opportunity when he ruled unchallenged before his election last year. Yet desperate times warrant at least a consideration of what can be done differently. Officials need only look around Southeast Asia to see some of the approaches that could be deployed.

Indonesia’s central bank will buy a chunk of bonds directly from the government, a monetization that would have once repelled technocrats. The attraction is easy to understand: Jakarta needs to boost budgetary outlays to cushion the economy. Absence of reserve currency status and fragility of emerging-market sentiment means big offerings to private investors are risky.

The Philippines has dabbled with small parcels, and expressed interest in doing something more. It helps that some of these steps represent evolution rather than revolution, and that it has become harder to rely on traditional monetary levers, with borrowing costs already at rock-bottom.

The Bank of Thailand’s benchmark rate is 0.5 percent. It’s hard to imagine a nudge of, say, another quarter point, doing much of anything, even if inflation leaves room. The bank expects consumer prices to fall 0.9 percent in the year to June, below the target range of 1 percent to 3 percent.

Reaping the dividends of a contained pandemic will require more. This is especially true if tourism and even manufacturing are slow to recover, as seems likely, despite hopes of travel bubbles and a proclaimed shift to higher-end foreign visitors, plus more locals. The baht has eased this month, but the stubborn strength of Thailand’s currency remains a headache.

A new team could go beyond cash handouts and subsidies to jump-start infrastructure spending and also tackle deeper issues like inequalities laid bare by the pandemic. Almost 30 million people -- out of a population of nearly 70 million -- applied for cash handouts that aimed to cushion the impact of the lockdown. However, the response was slow, bureaucratic and excluded millions. COVID-19 came on top of the worst drought in decades. Addressing poor labor productivity, employment rules and education should top the list to stage a bounce back. Finally joining the revised Trans-Pacific Partnership will help, too.

It may require outside voices, but they’ll have to push back against those wanting to use the pandemic to simply tighten government control. Ultimately, the need to buttress the economy may force the hand of whomever Thailand’s rulers tap, insider or not. A touch of ambition would be a start. Indonesia hasn’t been punished by investors for branching out in a new direction. That’s an example that ought to concentrate the minds of new names in Bangkok’s corridors of power.


Daniel Moss, Clara Ferreira Marques
Moss is a Bloomberg Opinion columnist covering Asian economies. Ferreira Marques is a Bloomberg Opinion columnist covering commodities and environmental, social and governance issues. -- Ed.

(Bloomberg)