Close coordination ordered on economic measures

Citing external risks to the economy, the Cabinet has reiterated that all agencies must coordinate closely through 22 measures in order to maintain stability and confidence so that economic expansion of 5 per cent per annum can be sustained.

Referring to the agreement reached at the recent Cabinet meeting, Arkhom Termpittayapaisith, secretary-general of the National Economic and Social Development Board (NESDB), said the framework for economic stability entailed state agencies’ coordination to cope with a continued influx of foreign capital that ran the risk of eroding stability and confidence.

By the end of the year, foreign capital worth US$5.86 trillion (Bt177 trillion) – three times the $1.85 trillion seen during the “Hamburger Crisis” in 2008 – is expected to pour into Asia due to the region’s sound economic fundamentals, and this could lead to a continued baht appreciation over the remainder of the year, he said. 

The influx is largely the expected result of US, Japanese and European quantitative-easing measures.

From the third quarter of last year to the first quarter of 2013, capital flows into Thailand accounted for $4 billion per quarter, compared to $2 billion per quarter for the five-year average, and this adversely affected Thai exports and caused lower-than-expected economic growth.

To keep the economy on track in the short term, the baht should move in a stable range, while a proper fiscal and monetary policy mix is required with close coordination among the Finance Ministry, Budget Bureau, NESDB and Bank of Thailand, and correct information disclosure, Arkhom said.

Targeting consistent economic growth of 5 per cent in the long term, domestic consumption and private investment bases will be established through income increases, expense reduction and new income, while exports, tourism and proper overseas investment will be promoted.

Besides, fiscal policy will be executed with discipline in order to expand the tax base and government revenue, and narrow the budget deficit. 

Economic and tax restructuring is also required to keep Thailand competitive and ensure sustainable growth, he added.

In regard to the 22 measures to help maintain growth, seven concern monetary issues, another seven are fiscal issues, and eight are specific.

 

MONETARY, FISCAL MEASURES

Among the seven monetary measures, currency trading is required to slow the baht’s appreciation and lessen volatility, while measures to limit capital inflows – under close oversight of the government – will be implemented prudently.

The differences between the Thai policy interest rate and the benchmark rates of other countries must be at appropriate levels for economic stability.

As regards capital inflows, the exchange rate, inflation, growth, employment and bubbles, macro-prudential measures should be employed to prevent interest rate and currency speculation.

Other monetary measures include international-reserve management, promotion of foreign-exchange risk management and regional cooperation on exchange rates.

The seven fiscal measures agreed by the Cabinet are: oversight of budget disbursement; execution of public mega-investment projects in the latter half of the year; reduction of the country’s external debts through state enterprises’ debt repayment and foreign-currency-denominated debt restructuring; tax restructuring; credit extension through specialised financial institutions; promotion of overseas investment; and encouragement of household savings and insurance nationwide.

 

SPECIFIC MEASURES

The eight specific measures, meanwhile, aim to support manufacturing, services, exports, investment and people’s income.

This entails upgrading agricultural products, while large industries will be encouraged to invest in technology development.

Exports will be promoted to attain the 9-per-cent target for annual expansion, and the number of tourists is expected to rise, leading to a targeted doubling in tourism income.

The contribution of small and medium-sized enterprises to gross domestic income is targeted to rise to 40 per cent, while stable energy sources and telecommunications technology will be supported.

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong has been assigned to lead the team tasked with seeing through the 22 measures, while the NESDB will provide the secretariat, Arkhom said. 

A monthly progress report will be submitted to the Cabinet.

At the same ministerial meeting, a downward revision of the 2013 export-growth target was acknowledged, but the figure was not disclosed, said Theerat Rattanasewee, the government spokesman.