ECONOMY | Staff Reporter, Thailand

Thai government approves US$5.4b budget for rural spending

It's the first major budget intended to boost growth outside Bangkok.

On January 27, the Thai parliament approved an additional THB190bn (USD5.4bn) in public spending for the current fiscal year (October-September), which is to take place outside of the capital Bangkok.

BMI Research analysts see this as a step in the right direction in terms of addressing the huge gap in wealth between the Thai provinces and the capital, which has not only held back the economy's development but has also been a key driver of the rise in social tensions that has taken place over the past decade.

Here's more from BMI Research:

The majority of the additional budget will go into funding local initiative projects, according to an official document detailing the spending plan, and will be the first major budget allocated by the government to specifically boost growth outside of Bangkok.

We have written on previous occasions about the economic and political threat posed by the high level of income inequality and the concentration of power at the central level, and while such spending plans do not exactly get to the heart of the problem, they are at least a recognition of the problem.

According to Reuters, Finance Minister Apisak Tantivorawong told the parliament that 'we want the country to be able to compete in the global market, but we can't only keep investing in Bangkok.'

While we do not agree with the government's assumption that the extra spending will boost economic growth by 0.4-0.5 percentage points this year, it will go a long way towards shoring up support for the military government in the run up to the next elections, which look likely to be held in 2018.

The northeast was the only region of Thailand to vote against the military-backed constitution in last year's referendum, and former Thai Prime Minister Thaksin Shinawatra, a foe of the military government, still holds sway there.

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