Thai Economy NewsThai Industry NewsThai Law, Visa & Regulations NewsThai Stocks NewsThailand Politics

BoT warns of populist stimulus

The Bank of Thailand has cautioned against government policy to promote a consumption-led stimulus as it could fuel inflation while failing to lift the country’s economic potential.

Prasarn Trairatvorakul, the central bank governor, said the economy was not in need of economic stimulus next year and trends did not warrant it.

Intra-regional trade and emerging markets should help to shore up Thai exports if the United States and Europe lag in their effort to develop a framework to solve their problems, even though the US, Europe and Japan account for one-third of the country’s trade.

“Although some people think the government should use fiscal stimulus quickly, fiscal policy can affect the economy quickly by nature. So the government should resort to stimulus spending only when it is really necessary,” he said at a forum held by Siam Commercial Bank yesterday.

Thailand’s economy is operating near full potential but it faces inflationary pressure, he added.

Dr Prasarn urged the government to focus on investment to steer the economy away from export dependence.

Public investment can increase the participation of the private sector, which can increase the overall contribution of investment to economic growth. Investment contributions to economic growth have remained modest since the 1997 economic crisis.

“The government should spend only on necessary projects, placing the proper priority on projects in the next year. The government should improve the country’s economic potential with its spending rather than focusing on consumption, which provides temporary impacts,” said Dr Prasarn.

“Avoid repeating the lessons of the US economy.”

Potential investment projects include transport logistics, job training and energy efficiency.

Dr Prasarn added that the Monetary Policy Committee’s decision to increase interest rates in the past had given the central bank appropriate room to execute policy in case of a severe world economic downturn.

Suthapa Amornvivat, SCB’s chief economist, said world economic conditions would have a limited impact on Thai growth in 2012, pointing to a projection of 4.5% to 5%, slightly higher than the expected growth in 2011.

A decline in exports next year will have a minimal impact on household income, she said.

Pailin Chuchottaworn, the president and chief executive of PTT Plc, said he believed the planned rise in daily minimum wages to 300 baht as well as monthly wages to 15,000 baht for new university graduates may facilitate Thailand’s shift to high-tech industries, pushing uncompetitive manufacturing to neighbouring countries.

“Thirty years ago, Japan used a similar policy to kickstart its economy after the world war. But I’m not sure Thailand will be as successful as the Japanese,” he said, adding the energy policies of the Yingluck Shinawatra administration lean toward a free market, paving the way for greater competition and Asean market integration by 2015.

“A resolution from National Energy Policy Commission last week to start floating energy prices to reflect actual costs is a good one,” he added.

“Protectionism and subsidies that keep everybody in a comfort zone will not help us prepare for greater competition from the Asean Economic Community in 2015. The AEC will mean a bigger market for Thai companies.

“Energy efficiency in Thailand is low because of subsidised energy, but all the Asean members except Malaysia and Brunei are energy importers.”

Source: Bangkok Post

ThaiVest Editorial Team
The Thaivest Editorial Team is a dedicated group of writers and editors with a passion for Thailand's vibrant economy, culture, and lifestyle. With diverse backgrounds in finance, economics, and journalism, we provide valuable insights into living well in Thailand, making money online, and practical tools for navigating its dynamic market. Our mission is to keep our readers informed about the latest developments, opportunities, and challenges in Thailand's economic and cultural landscape. Stay connected with Thaivest for reliable, well-rounded coverage of all things Thai.

Leave a Reply