11 July 2024

Budgetary provisions are under scrutiny as Thailand’s House of Representatives is currently in the process of vetting the much-delayed budget bill for fiscal 2024. The total outlay is 3.48 trillion baht (US$99 billion).

Public attention has turned to the widening income and wealth inequality, which has plagued Thailand for long. There has been a growing debate about the rich getting richer and the poor getting poorer.

State officials vs the people

The government has allocated close to 1 trillion baht for welfare spending on state officials and other citizens in fiscal year 2024. A look at the figures reveals the stark disparity in the per capita spending allocation for state officials as compared to other citizens.

The welfare budget for state employees and their families is 499 billion baht, Chat Khamsaeng, director at 101 Public Policy Think Tank who dug into the details of the budget provisions, revealed.

The welfare budget comprises pensions (329.4 billion baht), healthcare (84.6 billion baht), contributions to the Government Pension Fund (78.8 billion baht), education and life insurance (4.5 billion baht) and others (2.3 billion baht).

Interestingly, over time healthcare costs have ballooned.

Nearly 1.8 million civil service officials will be beneficiaries, including military and police personnel. They include 1.2 million state employees. In addition 4.6 million family members of state officials and 800,000 of retired state officials are covered by state healthcare.

Meanwhile, the welfare provision for the rest of the citizens, totalling 520 billion baht, includes healthcare (152.7 billion baht), pension for the elderly (93.3 billion baht), education subsidy (83.7 billion baht), contribution to the social security fund (65.5 billion baht), welfare card scheme for the poor (50 billion baht) and others (82.6 billion baht).

Though the spending on people’s welfare is slightly higher than on state officials, it covers a considerably larger section of the country’s population. The planned spending on people’s welfare will cover round 66.2 million.

The cost of welfare offered to each state official is estimated at 96,070 baht annually, or 12 times the 7,819 baht allocated to the average ordinary citizen.

“The huge gap could be explained as the government’s effort to retain talent, so it has to offer a decent salary and welfare to state officials. However the gap may be too high,” said Chat.

As Thailand has become an aged society, pension costs have also risen. In the years ahead, it would put pressure on fiscal outflows.

Economists have long called for more child welfare measures, and subsidies even when a child is in the mother’s womb.

Currently, a child — newborn until six years old — from poor families gets only 600 baht per month while economists want it to be hiked to over 1,000 baht per child.

Local economists, the World Bank and the International Monetary Fund (IMF) have called for tax reforms. In the past few days, the IMF has called for government fiscal spending to target vulnerable groups and urged a gradual increase in value-added tax in order to strengthen the country’s finances.

A serious problem

Chat said that despite overall income inequality, the situation had improved in recent years. But wealth inequality, such as land and property, has been widening.

A study by the World Bank found that with a Gini coefficient index of 43.3 per cent in 2019, Thailand had the highest income inequality rate in the East Asia and Pacific region. The average monthly income of rural households was only around 68 per cent of that of urban households.

Rural households also continue to suffer from low education, a large number of dependents, and difficult living conditions.

Though Thailand has made remarkable progress in reducing poverty from 58 per cent in 1990 to 6.8 per cent in 2020, driven by high growth rates and structural transformation, 79 per cent of the poor remain in rural areas and mainly in agricultural households, according to a Rural Income Diagnostic launched by the World Bank in 2022.

Reversal of trends

Thailand’s gains in poverty reduction slowed from 2015 onwards with poverty increasing in 2016, 2018 and 2020, reflecting a slowing economy, stagnating farms and business incomes, and the COVID-19 crisis.

The report found that in 2020, the poverty rate was over 3 percentage points higher in rural areas than in urban zones and the number of rural poor outnumbered the urban poor by almost 2.3 million.

The prevalence of poverty also has been uneven across geographic regions with the poverty rate in the South and in the Northeast almost double the poverty rate at the national level, according to the World Bank.

Largest wealth inequality

Credit Suisse, an international investment bank, had earlier reported that Thailand had the largest wealth gap in the world.

The Global Wealth Report and Databook published in December 2018 showed that the richest 1 per cent in Thailand now control almost 67 per cent of the country’s wealth.

According to the Credit Suisse report, the bottom 10 per cent of Thais hold zero per cent of the wealth, being either in debt or having no documented household income.

The poorest 50 per cent of Thais now hold only 1.7 per cent of the country’s wealth, while the richest 10 per cent control a massive 85.7 per cent.

The Bank of Thailand has reported that low income groups have been bogged down by high household debt.

By Thai PBS World’s Business Desk