'Success hinges on spending efficiency'

“The introduction of the package signalled that the government is committed to stimulating the economy while hoping that it will increase the confidence of the private sector. If the private sector follows the government in increasing spending and investment, it should be able to support the stimulation of the economy. But the impact would be more apparent in 2015 than in 2014,” Prasarn said at the “EIC Conference: Thailand in Transformation” seminar arranged by Siam Commercial Bank’s Economic Intelligence Centre (EIC).

“The impact of the stimulus package depends on how much of the increase in public spending actually transfers to the private sector, since private spending makes a larger contribution to economic growth than the spending of the public sector,” he said.

The military government is planning to concentrate on spending the 2012 and 2013 reserve budgets together with ‘Strengthening Thailand’ project worth totally  Bt23-billion “. The spending will be made over the next three months to boost the economy via creation of jobs related mainly to maintenance projects planned by various ministries.

As for the Bt40-billion subsidy to be paid to rice farmers this month, Prasarn said setting a payment ceiling of Bt15,000 would increase the efficiency of the programme, since the money would be paid to all types of farmers. Another good point is that this scheme will not interfere with the market mechanism or distort the market price of commodities.

The central bank governor also said the Bt324.46-billion stimulus package would be able to support an economic-growth rate of 4.8 per cent in 2015.

Sutapa Amornvivat, first executive vice president of SCB and chief economist of the EIC, said the stimulus package was needed in the short term, while the farm-subsidy programme and the job-creation strategy would not pile up government debt and so would not distort the market situation.   

“The multiplier effect that the government hopes for is most likely to happen, since the groups of people who will receive the injection of capital have high spending rates. Therefore the acceleration of the budget disbursement should be able to boost the grass-roots economy,” she said.

However, the impact of the stimulus package in both the short and long terms would still largely depend on the pace and efficiency of the budget disbursement, she added.