Reduced govt spending sparks fears of slowdown

Thailand's three most powerful private-sector organisations have expressed concern over delayed budget disbursement in the government sector, as well as falling crop prices, which could lead to an economic slowdown and low consumer spending.

To drive economic growth, the Joint Private Standing Committee – comprising the Board of Trade of Thailand, the Federation of Thai Industries, and the Thai Bankers Association – yesterday urged the government to accelerate its budget disbursement, and to provide subsidy measures for major crops – rice, rubber and sugar cane, in particular.

It also called for help for small and medium-sized enterprises (SMEs), and for the Bank of Thailand to lower the policy interest rate.

Yesterday’s meeting was chaired by Supant Mongkolsuthree, chairman of the Federation of Thai Industries, who said the private sector was particularly concerned over delayed budget disbursement by the government, as public spending was a key driver of the economy.

Drop in government disbursement

As of the end of January, the government’s disbursement and investment totalled Bt50 billion, just 13 per cent of the budgeted level for the current fiscal year, which began in October.

Over the same period in the previous fiscal year, government disbursement exceeded Bt120 billion.

Supant said that with slowing disbursement and investment by the government, budget spending and investment would account for only 30 per cent of the full-year target by the end of March – halfway through the fiscal year.

"Slow budget disbursement and investment by the government will affect the growth of private businesses, as they have waited for the government’s projects. The government needs to stimulate its investment projects and spending, which would help drive growth for the private sector," he stressed.

The joint standing committee, meanwhile, has maintained its economic-growth projection for 2015 at 3.5 per cent, as it expects stronger economic expansion and more budget disbursement in the second half.

Export forecast cut

However, it has revised down its export-growth forecast from 3.5 per cent to just 2 per cent-2.5 per cent, due to the slow pace of global economic expansion, and depreciation of the currencies of the Kingdom’s trading partners and export rivals in relation to the US dollar.

Supant said that since many negative factors would continue to hit Thai shipments, the export sector would not experience brighter growth this year.

The committee called for the central bank’s Monetary Policy Committee to cut the policy interest rate by another 50 basis points in a bid to prevent an influx of foreign capital and a further strengthening of the baht.

Cutting the policy rate should also help increase Thai export competitiveness, he added.

Moreover, in order to help SMEs, the committee encouraged the government to provide financial support by reducing the tax burden on SMEs, as well as provide funding for them.

Asked about the government’s performance now that it has been in place for almost half a year, Supant said that while the private sector acknowledged its good intentions in terms of driving the country’s growth, few tangible results had been seen.

Deputy Finance Minister Wisut Srisuphan said yesterday that Bt1.43 trillion, or 41 per cent of the overall target of Bt3.5 trillion, was disbursed into the economic system during the first five months of the fiscal year, between October last year and February. He said that of the Bt1.43-trillion disbursed money had been divided into Bt1 trillion of the government's regular expenditures, or 47.8 per cent of the budget set at Bt2.12 trillion; Bt80 billion of government's investment from the original debts of Bt140 billion, or 17.9 per cent of the Bt449 billion budget.