Social protection is pathway to pandemic recovery

Thailand has managed to control the number of Covid-19 infections but faces a big challenge in navigating the recovery to the socio-economic fallout to the global pandemic. The question now is: How does Thailand recover its economy and address the various social implications of the pandemic?

Social protection -- a set of policies and programmes aimed at preventing or protecting all people against poverty such as cash transfers and social insurance -- has been at the centre of the socio-economic response to the crises in Thailand as well as in other countries.

The Thai government was one of the first in the region to implement a wide range of emergency social protection responses. Such measures included cash assistance of 5,000 baht for three months to informal sector workers and farmers affected by Covid-19.

The government also expanded existing social security schemes under the Social Security Fund, and these have provided important support to enterprises and protection for workers and their families.

The recent cabinet decision to provide emergency top-up funding to beneficiaries of the Child Support Grant, Disability Grant, Old Age Allowance and the State Welfare Card was an important addition. By building on existing social protection schemes, the monthly top-up of 1,000 baht for three months will provide additional economic support to vulnerable families severely affected by Covid-19.

Such measures will play a critical role in easing the immediate economic and social impact of the pandemic. However, Covid-19 has unleashed an unprecedented economic shock in Thailand. With its close connectivity to global markets and the huge role that the tourism sector plays in the economy, Thailand will be one of the most adversely affected countries in the region.

In its latest estimates in May, the Office of the National Economic and Social Development Council (ONESDC) lowered its GDP forecast to a contraction of 5–6% this year. It warned that as many as 14.4 million jobs were at risk of disappearing by September.

While these economic impacts are affecting everybody, some have been impacted much harder than others and this inequality is set to persist and potentially worsen. It is now evident that the crisis has hit hardest the individuals and families who were already struggling before it happened.

At the same time, those who were able to make ends meet previously are now struggling, as the crisis affects all. Its impacts are expected to affect families well into the future.

Evidence from past economic crises showed us that social protection is one of the most effective fiscal tools to provide economic stimulus and recovery. Such stimulus can increase households' ability to consume goods and services, and thus support local businesses that may be struggling to re-establish themselves.

The role of social protection in stimulating the domestic economy is more important than ever, given the likely shrinking of foreign investment and global demand and, at least temporarily, the higher dependence on public investment and domestic demand.

The next phase of the crisis should be seen as an opportunity for a fundamental review and reform of the social protection systems to build the resilience of the most vulnerable populations against future shocks, as well as to support economic recovery.

Some good regional examples are the way the Republic of Korea expanded its pension and social insurance protection massively following the 1997 Asian financial crisis.

China did the same with its pension and health systems during the global financial crisis in 2008, injecting required financial liquidity into the economy and preparing the country to better weather future crises. Thailand followed a similar recipe in 2009 by making the Old Age Allowance universal. What could be done this time in Thailand?

First, the coverage of cash transfer schemes should be expanded to cover the significant number of families and individuals who have become vulnerable to poverty and destitution due to Covid-19.

One of the examples is families with children who were not identified as vulnerable and therefore are currently not eligible to receive the Child Support Grant (CSG). Expanding the CSG to all children under six years would be part of a key strategy to protect the welfare of more families.

A universal CSG would protect children in the face of any future economic crises, reduce the risk of families in need being left without financial support, be easier and therefore more efficient to administer; while having the potential to further boost local economies.

Second, the current crisis has underscored challenges faced by workers in the informal sector. The 5,000-baht scheme allowed for an unprecedented registration of these workers, offering an opportunity to better understand who they are and how to reach them.

It is time to develop an integrated strategy to promote the formalisation of workers and businesses, including registering workers under social security schemes, through schemes further adapted to their characteristics. Research done in other countries in the region showed that a higher level of formalisation leads to an increase in business and workers productivity.

Such challenges observed in the response to Covid-19 should be addressed now, to build back a better for the longer term. As in the past, Thailand now has the potential to lead by example the socio-economic response to crises in the region, this time by integrating long-term systemic social protection measures into the economic recovery plan, complementing immediate interventions.

Originally published on Bangkok Post