More US gloom expected whoever is president, Thai economists say
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Thai economists are pessimistic about the state of the US economy, which is expected to remain weak for two or three more years regardless of whether President Barack Obama is re-elected or his rival Mitt Romney wins the presidential race next month. Thai
“Whoever the next president of the United States will be, he can’t do much to boost the US economy,” Kobsak Pootrakul, an executive vice president of Bangkok Bank, said yesterday.
As the United States faces high fiscal deficits, its next leader will be forced to cut spending. About US$330 billion to $600 billion (Bt10 trillion to Bt18.3 trillion) will be taken out of the system next year, he said.
“It is apparent that while one party wants to collect more taxes and spend money, the other party does not want to raise taxes or spend money,” Kobsak said.
Romney said in the first presidential debate yesterday that he would cut taxes and offset revenue losses by closing a loophole in tax incentives. He also said lower taxes would lead to more job creation and then people would pay more taxes.
Kobsak said such a promise lacked details. He does not think Romney would find adequate revenue to address large budget deficits by such measures.
“The tax cut promised by Romney may please voters, but he has to get revenue from somewhere,” then that will adversely affect people, he said.
What is actually implemented could be quite different from what the rivals promise during an election campaign, he said.
Anticipating a weak economy for the next two or three years, Kobsak said Thai exporters could not rely on the US market.
Banluesak Pussarangsri, an executive vice president of CIMB Thai Bank, said there was not much difference in policies between Obama and Romney.
Obama plans to collect more taxes from high-income earners – those having an annual income of $250,000 and over – but lately he has been trying to please voters by relaxing his policies aimed previously at addressing budget deficits, he said.
Romney has a clear policy to cut both corporate and personal income taxes to boost the economy. But he also plans to limit public spending to no more than 20 per cent of gross domestic product, but Obama does not put a limit on public spending.
The crucial policy that will affect Thailand and Asia is the third round of quantitative easing that Romney and the Republican Party oppose. The US Federal Reserve has said it plans to inject more liquidity into the economy. Romney also vowed to fire Ben Bernanke, chairman of the Fed, Banluesak said.
“People in general are worried about an abrupt ending of more liquidity injections, which might disrupt the global economic recovery. And it would cause capital to flow out of Asia back to the US and Europe, leading to chaos in the global financial market,” Banluesak said.
“Obama’s policies may be more appropriate, since their continuity would be a boon for global and Thai economies,” he added.
Charl Kengchon, managing director of Kasikorn Research Centre, said Romney’s tax cut would likely stimulate the economy while Obama emphasised more on social equality by taxing the rich more. Some economists even criticised Obama’s policy for possibly weighing on private investment, he said.
A recent poll of economists in the United States also suggests that most of them view Romney’s policy as better for driving economic growth, he said.
