BANGKOK: A Thai government plan to borrow 400 billion baht (US$12.2 billion) to cushion the economy from higher oil prices is facing a legal test that could define the scope of its emergency powers to help struggling households and spur economic growth.
Thailand's Constitutional Court is reviewing whether the borrowing decree issued by Prime Minister Anutin Charnvirakul's administration qualifies as an emergency measure, after accepting a petition from opposition lawmakers last month.
A ruling, expected by July 16, could shape both the fate of the loan and the pace of government support as growth weakens and fiscal room narrows in South-East Asia's second-largest economy.
A court ruling that disrupts the borrowing plan "could add another layer of uncertainty to the growth outlook," said Lavanya Venkateswaran, senior Asean economist at OCBC, though solid exports and some external tailwinds could support near-term momentum.
Only months into its four-year term, Anutin's government is already facing discontent as a price shock driven by the war in Iran deepens Thailand's farm debt crisis, Reuters has reported.
The cabinet approved the decree in May, splitting funds equally between relief measures such as a 176 billion baht consumer subsidy scheme and funding a longer-term shift towards clean energy.
Natthaphong Ruengpanyawut, leader of the main opposition People's Party, which was among those that petitioned the court, told reporters last month he supported the transition to clean energy but opposed using an emergency decree to push it through.
"The government has done nothing wrong," Paradorn Prissananantakul, a minister attached to the prime minister’s office, told Reuters. "I am confident the decree will be passed."
Even if the court strikes down the decree, measures already rolled out under the plan will stand, Paradorn said.
Risk of political fallout
Finance Minister Ekniti Nitithanprapas said last week the borrowing decree is essential for the energy transition, citing Thailand's heavy reliance on imported energy - nearly 10 per cent of gross domestic product - as a key vulnerability.
"If we do not act now, Thailand risks losing its competitiveness over time," he said.
The central bank expects the fiscal push from the borrowing to lift economic growth this year by half a percentage point to two per cent. The economy expanded 2.4 per cent last year, lagging regional peers.
The court could also allow the cost-of-living relief portion of the borrowing plan to stand while striking down the energy component, with limited impact on government operations, said political scientist Stithorn Thananithichot of Chulalongkorn University.
"The government still has some room on the spending side to keep this project going. If there is no money, it can be halted… possibly shelving the project and waiting to use the fiscal 2027 budget," he said, referring to the budget that will start in October.
Even a ruling against the entire decree would have largely political, not destabilising, consequences due to the government's parliamentary majority, Stithorn said.
"Administratively, the government can explain the issue, but politically it will face heavy criticism," he said. - Reuters
