Fiscal spending and jobs to be the focus
Additional fiscal spending and jobs programmes are needed to help cushion the Thai economy from the impact of a global recession in 2009, according to economists at the Fiscal Policy Office. ''Inflation isn't a concern, not with the sharp declines in oil prices. The main risk is economic growth,'' said Somchai Sujjapong, the director-general of the Fiscal Policy Office.
The Bank of Thailand cut its growth projections earlier this month for the Thai economy to a range of 4.3% to 5% this year and between 3.8% and 5% in 2009, down from earlier forecasts of 4.3% to 5.8%.
Policymakers will meet tomorrow to discuss new stimulus measures to help the capital market, create jobs and spur investment and consumption.
Dr Somchai said increased fiscal spending was critical to help buffer the impact of a slowing global economy.
''Next year we will certainly feel the impact of the slowing global economy. We need to enact measures that will have an impact,'' he said.
He declined to offer details, but said the FPO was preparing a stimulus programme that focused on four areas: reviving confidence, boosting investment, supporting the country's competitiveness and alleviating poverty.
Thailand's relatively strong fiscal position gives policymakers ample scope to boost spending or cut taxes. Public debt is now at a relatively low 35% of gross domestic product, well under the legal ceiling of 50%.
Dr Somchai said that while consumer and business confidence had been relatively weak this year due to domestic political uncertainties, the overall economy remained relatively strong.
He said third-quarter economic growth was projected at 4.5%, while growth for the fourth quarter was likely to slip under 4%, putting growth for the full year at around 5.1%. For 2009, the FPO maintains a growth forecast of 4-5%.
Teerana Bhongmakapat, dean of economics at Chulalongkorn University, said growth of 4-5% was under the overall capacity of the economy.
''The turmoil in the global economy and the instability in domestic politics is only adding to the weakness in the Thai economy,'' he said.
While added that fiscal spending may be needed to help support growth, deficit spending had its limits and it remained uncertain how long the current crisis would last.
''The signs are that recovery will take time. The latest figures for the US economy could show a contraction for the third quarter, and the United Kingdom is already in recession,'' Dr Teerana said.
He said Thai growth could slow to less than 3% in 2009 as a result of the global slowdown.
More worrisome was the agricultural sector, which will surely suffer from falling commodities prices, depressing rural growth and potentially leading to rising non-performing loans for financial institutions.
Dr Teerana said any jobs programme needed to be carefully structured to maximise benefits while minimising the burden on the state.
''We don't need additional welfare programmes. It's uncertain how long this crisis will last and the government can't simply transfer funds from one group to another for a long period of time,'' he said.
Aat Pisanwanich, director of the Centre for International Trade Studies of the University of the Thai Chamber of Commerce, said global economic growth could be depressed for two years, with the US potentially facing a four- to five-year period of weakness.
''We definitely need proactive measures, particularly for smaller companies that could be forced to close due to the recession,'' he said.
Tax incentives and measures to ensure sufficient access to liquidity for companies were also needed to help the private sector and consumers reduce expenses.
Dr Aat said public investment also needed to increase, not only for Bangkok megaprojects but also investment in rural provinces such as new roads and irrigation systems.
''Frankly, I don't think this crisis will be as bad as 1997-98, when unemployment jumped to two million people, four times current levels,'' he said.
''The economy during that crisis contracted heavily. I think for Thailand, we will still see positive growth this year and in 2009.''