Kingdom 'not safe' from crisis

Speaking at an academic seminar held by the Fiscal Policy Office (FPO) yesterday, former finance minister Thanong Bidaya said the Thai economy currently had low unemployment, low economic expansion and low inflation, unlike the situation when the country last confronted an economic crisis. However, this did not mean the country was free of risk.

During the economic crisis in 1997, Thailand witnessed high borrowings, high external debts, high state expenditure and high economic growth.

If the economic growth is too low, state revenue will be low and the manufacturing sector will have less expansion, he said.

Thanong said Thailand, with low export growth, could see its gross domestic product expand by less than 4 per cent this year, while TDRI chairman Kosit Panpiemras expected the economy hit the 4-per-cent target.

Thanong said: "The Ministry of Finance has to keep an eye on [economic] signs and inform the government to prevent a crisis. Certainly, the state expenditures and an economic restructuring could help."

Kosit said that at present, academics saw that several countries’ monetary and fiscal measures were not sufficient to bolster their economies with sustainable growth, pointing to the lessons learned in the United States and Japan.

He urged relevant parties to help Thailand move from being a subcontractor to a manufacturer through improved efficiency in study, research and skill development.

If Thailand wants to move from being a middle-income country to a high-income one, its economy must grow by 6 per cent per annum for 10 consecutive years, said Finance Ministry permanent secretary Areepong Bhoocha-oom. Currently, Thailand’s GDP growth averages 4.5 per cent per year, and moving it up to 6 per cent would be a challenge for policy-makers.

"The investment plan for infrastructure and the Board of Investment’s promotions also play a part in supporting economic growth. Tax restructuring through reduction of corporate and personal income taxes will raise Thailand’s competitiveness," Areepong said.

The government will have to lay out efficient infrastructure, reform work processes, and change weaknesses into strengths through state measures, he said.

Somchai Sajjapong, FPO director-general and Finance Ministry spokesman, said the finance minister had agreed in principle to solutions to illegal lending. Such solutions focus on developing the capacity of Thais to earn sufficient income to match their expenses, personal financial management and encouragement of communities’ assistance through special financial institutions and financial community organisations. The ministry will also set up provincial committees to tackle illegal lending.

Kosit expressed minimal concerns over local political risks, while Thanong saw them as temporary. He expects upcoming protests to be lawful and non-violent.

"In the past, despite the political violence, foreign investors have not relocated their investment," Thanong said.