Economy to shrink 3%, says Korn
- By: POST REPORTERS
- Published: 24/03/2009 at 12:00 AM
- Newspaper section: News
More stimulus on the way to curb job losses
Thailand's economy will shrink by a sharp 3% this year, worse than previously forecast, says Finance Minister Korn Chatikavanij.
Mr Korn yesterday said his ministry would put in place more fiscal policies to cope with the steeper-than-expected economic deterioration.
The government earlier forecast a contraction of up to 2% of GDP for the year.
"Without economic stimulus measures from the government, Thailand's economy could contract by 8% or 9% this year, which could cause almost 2 million workers nationwide to lose their jobs," Mr Korn said.
"The 3% shrinkage forecast has already taken into account figures that are the expected outcomes of the government's finance policies that will be implemented this year."
The finance minister said the government needed to continue its budget deficit policy next fiscal year with the deficit figure rising to 390 billion baht from 350 billion baht this fiscal year.
This fiscal year's deficit figure of 350 billion baht is equivalent to 3.5% of the country's GDP.
Mr Korn said the government would exercise its budget deficit policy cautiously because it needed to take into account the long-term stability of state's finances.
The government would also issue a royal decree to authorise the government to spend the existing 17 billion baht in revenues gained from the digit lottery programme launched in 2003 during the Thaksin Shinawatra administration, Mr Korn said.
The government did not dare spend the 17 billion baht after the Council of State, which looked into the legality of the lottery scheme, ruled it was not underpinned by any law. This meant the government had no authority to spend the money.
The digit lottery scheme was scrapped by the coup-appointed Surayud Chulanont government.
Economist and former deputy prime minister Olarn Chaipravat said for each 1% contraction in GDP, some 400,000 people would lose their jobs.
Based on this premise, if GDP shrinks by 3% this year, down from 2.6% growth last year, unemployment could rise to over 2 million.
Satit Rungkasiri, the Revenue Department's adviser on strategic tax administration, said the department had forecast that country's tax revenues would fall 120 billion to 130 billion baht below its 1.4-trillion-baht target.
Mr Satit also said this year's tax revenue figure was even lower than in 1997, when the so-called "Tom Yum Kung" economic crisis hit the country.
"It might be because the revenue set a lower target during the Tom Yum Kung crisis. This year, we've set quite a high target," Mr Satit said.
Amara Sripayak, the central bank's senior director for the domestic economy, supported the government's plan to seek loans from foreign banks, saying the administration's spending of the money on infrastructure projects over the next three years would help boost investors' confidence in the country's economy over the long run.
She said private investors would not invest more in the Thai economy in the near future because many did not expect the Thai economy to recover within the year.
"It's better for the government to spend on megaprojects over the next three years," she said.
Mrs Amara also supported the Finance Ministry's plan to give priority to the implementation of fiscal measures to spur growth.
The measures would help boost the country's flagging economy, while those measures could be backed up by monetary measures as well, she suggested.
Meanwhile, MPs and senators will meet today to deliberate the government's proposal to borrow 70 billion baht from foreign banks to shore up the economy.
The House Secretariat has sent a letter to MPs calling on them to take part in the special sitting.
The government plans to seek 70 billion baht in loans from the World Bank, Asian Development Bank and Japan International Cooperation Agency to fight the economic slump.
The borrowing is aimed at financing investment in infrastructure projects, including logistics, water management systems, health care and education.
To be vetted by parliament are also a Thai-Japanese fiscal cooperation plan and a draft loan contract proposed by the Abhisit Vejjajiva cabinet.
The documents involve the Japanese government's initial agreement to lend 63 billion yen to Thailand to invest in the Red Line mass transit route from Bang Sue to Rangsit.