(Bloomberg) -- Thai Prime Minister Paetongtarn Shinawatra unveiled her new cabinet lineup, retaining Pichai Chunhavajira as finance minister in a signal of policy continuity as she faces the task of bolstering Southeast Asia’s second-largest economy.
A former chairman of the Thai stock exchange, Pichai was named finance minister, and most members of the previous cabinet led by ousted leader Srettha Thavisin were also retained, according to a list published in the Royal Gazette on Wednesday. The cabinet is set to be sworn-in by the king within days and Paetongtarn is expected to deliver a policy statement to the parliament soon.
Phumtham Wechayachai, a senior member of the Pheu Thai Party, which leads the multi-party ruling coalition, was named the defense minister, while Pirapan Salirathavibhaga, the leader of military-backed United Thai Nation Party kept his former post as the energy minister.
Paetongtarn, the third member of the influential Shinawatra clan to become prime minister, took over from Srettha who was ousted by the nation’s Constitutional Court for an ethical breach last month. She has to lead a $500 billion economy that has posted average sub-2% growth rates for nearly a decade under military-backed rule, well below its regional peers.
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Pichai’s challenges include accelerating an economic recovery with a controversial $14 billion cash handout to nearly 70% of the population that Srettha had touted as a way to boost growth to 5%. He may have to rework the so-called “digital wallet” program as Paetongtarn had hinted at a review after being elected as the leader.
The parliament is set to approve this week a 3.75 trillion baht ($109 billion) budget for the fiscal year starting in October to bolster an economy hobbled by near-record household debt, high living costs and a sluggish manufacturing sector battling cheap imports of goods from China.
The cabinet formation is good news for policy continuity and budget disbursement, said Nattaporn Triratanasirikul, an economist at Kasikorn Research Center.
“We don’t expect any delay in the next fiscal budget for now,” Nattaporn said. “We think they will continue main policies as announced by the previous government as they are still the same team.”
Political Newcomer
Paetongtarn, 38, is a relative newcomer to politics and will need to prove that her lack of administrative experience isn’t a handicap in keeping the unwieldy coalition together, while seeking to attract foreign investment into high-tech industries and stem the exodus of foreign funds from the nation’s stocks.
Investors have cheered the end of the monthslong political turmoil with Thailand’s benchmark SET Index bouncing about 5.7% since Paetongtarn was nominated as the next prime minister on Aug. 15. The baht has rallied about 2% during the period, reaching its highest level in more than a year.
Pichai, who first took the finance post in April this year, has taken steps to tighten oversight of the stocks and bonds markets, besides introducing tax breaks to drive investment in so-called sustainable funds. He’s also promised to launch a state fund which will guarantee a minimum annual return and principal protection for investors.
Still, investors will be closely watching how Paetongtarn’s administration deals with the central bank, which previously ignored calls from Srettha to cut rates. The Bank of Thailand has also pushed back at Pichai’s suggestions to raise the inflation target range of 1% to 3%.
Thaksin Shadow
Now with a scion of the Shinawatra clan in power, political analysts expect Paetongtarn’s father, former premier Thaksin Shinawatra, to wield significant influence on his daughter’s administration. Known for his populist policies before he was overthrown in a military coup, Thaksin is already giving his views on how the country should be run.
At a lavish dinner talk last month, Thaksin said the finance minister along with the central bank should take a lead in addressing the nation’s chronic debt problem.
“There’s no question if she’s his proxy,” said Titipol Phakdeewanich, dean of political science at Ubon Ratchathani University. “Thaksin has been conducting himself as if in a leadership role, which only makes him increasingly overshadow his daughter.”
--With assistance from Pathom Sangwongwanich and Anuchit Nguyen.
(Updates with comments from an economist from paragraph seven.)
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