The challenge is to strike a balance between timely implementation and rigorous cost-benefit analyses, as well as efforts to make the most efficient use of public resources. Focusing on those projects with the greatest 2  BIS central bankers’ speeches  potential for “crowding-in” private investment should also be encouraged. Multiplier effects would provide additional lift to potential growth at no public cost, and would be the very evidence that public policy has served its function of aiding the private sector. Current supply constraints are not limited to physical capital, but extend to human capital as well. In 20 years, Thailand will be among the first ASEAN countries to enter an aging-population phase, with share of senior citizens rising from 15 to 27 percent of total population. Early symptoms have already been felt in some industries, whose capacity to produce and invest is stifled by the lack of qualified labour. Tight labour market is also indicative of labour shortage at the lower end of the skill spectrum. Market forces have failed to resolve these issues. Education policy, tax incentives, minimum wage, and migration policy all have bearings on the labour market dynamics. The long-term growth implications of these policies should be incorporated into the policymakers’ considerations. Implementing a comprehensive set of economic policies to lift potential growth, while pursuing other public policy objectives, is not an easy task. It requires a close coordination among various policy authorities. It also takes immense skills to introduce the right sequencing of policies at the right time.

The lack of a functioning government early this year also curtailed public finance capability, subjecting infrastructure investment to further delay and putting 2015 fiscal budget at risk. Tourism, a shining sector in 2013, was increasingly weighed by security concerns. A tepid recovery in exports offers only a partial offset to softening growth, and could not prevent the overall economy from contracting in the first quarter. It is under this backdrop that the end to political stalemate in May provided some cause for short-term optimism. The first relief comes from a resumption of government spending. The presence of a fully functioning government ensures that the budget for 2015 fiscal year could be prepared on time, eliminating the risk of a Thai-style “fiscal cliff”. An acceleration of public disbursement in the short-term is also providing a welcomed boost to the economy. Plan for public investment in infrastructure is now back on track, and there have been renewed efforts to maximize the efficiency of these projects. A resumption of effective fiscal policy, in turn, lends support to domestic demand recovery. Repayment of overdue debt to farmers, approvals of backlog projects by the BOI, and fresh loans to the SMEs provided quick relief in and of themselves, but the combined multiplier effects could also be meaningful. By shoring up income and improving overall sentiments, these measures constitute an important effort to revive private spending. Fast indicators already suggest that private consumption and investment are stabilizing, and private confidence improving.