24.03.09 Economy to shrink 3%, says Korn
Source: Bangkok Post
More stimulus on the way to curb job losses
Thailand's economy will shrink by a sharp 3% this year, worse than previously forecast, says Finance Minister Korn Chatikavanij.
Mr Korn yesterday said his ministry would put in place more fiscal
policies to cope with the steeper-than-expected economic deterioration.
The government earlier forecast a contraction of up to 2% of GDP for the year.
"Without economic stimulus measures from the government, Thailand's
economy could contract by 8% or 9% this year, which could cause almost
2 million workers nationwide to lose their jobs," Mr Korn said.
"The 3% shrinkage forecast has already taken into account figures
that are the expected outcomes of the government's finance policies
that will be implemented this year."
The finance minister said the government needed to continue its
budget deficit policy next fiscal year with the deficit figure rising
to 390 billion baht from 350 billion baht this fiscal year.
This fiscal year's deficit figure of 350 billion baht is equivalent to 3.5% of the country's GDP.
Mr Korn said the government would exercise its budget deficit policy
cautiously because it needed to take into account the long-term
stability of state's finances.
The government would also issue a royal decree to authorise the
government to spend the existing 17 billion baht in revenues gained
from the digit lottery programme launched in 2003 during the Thaksin
Shinawatra administration, Mr Korn said.
The government did not dare spend the 17 billion baht after the
Council of State, which looked into the legality of the lottery scheme,
ruled it was not underpinned by any law. This meant the government had
no authority to spend the money.
The digit lottery scheme was scrapped by the coup-appointed Surayud Chulanont government.
Economist and former deputy prime minister Olarn Chaipravat said for
each 1% contraction in GDP, some 400,000 people would lose their jobs.
Based on this premise, if GDP shrinks by 3% this year, down from
2.6% growth last year, unemployment could rise to over 2 million.
Satit Rungkasiri, the Revenue Department's adviser on strategic tax
administration, said the department had forecast that country's tax
revenues would fall 120 billion to 130 billion baht below its
1.4-trillion-baht target.
Mr Satit also said this year's tax revenue figure was even lower
than in 1997, when the so-called "Tom Yum Kung" economic crisis hit the
country.
"It might be because the revenue set a lower target during the Tom
Yum Kung crisis. This year, we've set quite a high target," Mr Satit
said.
Amara Sripayak, the central bank's senior director for the domestic
economy, supported the government's plan to seek loans from foreign
banks, saying the administration's spending of the money on
infrastructure projects over the next three years would help boost
investors' confidence in the country's economy over the long run.
She said private investors would not invest more in the Thai economy
in the near future because many did not expect the Thai economy to
recover within the year.
"It's better for the government to spend on megaprojects over the next three years," she said.
Mrs Amara also supported the Finance Ministry's plan to give priority to the implementation of fiscal measures to spur growth.
The measures would help boost the country's flagging economy, while
those measures could be backed up by monetary measures as well, she
suggested.
Meanwhile, MPs and senators will meet today to deliberate the
government's proposal to borrow 70 billion baht from foreign banks to
shore up the economy.
The House Secretariat has sent a letter to MPs calling on them to take part in the special sitting.
The government plans to seek 70 billion baht in loans from the World
Bank, Asian Development Bank and Japan International Cooperation Agency
to fight the economic slump.
The borrowing is aimed at financing investment in infrastructure
projects, including logistics, water management systems, health care
and education.
To be vetted by parliament are also a Thai-Japanese fiscal
cooperation plan and a draft loan contract proposed by the Abhisit
Vejjajiva cabinet.
The documents involve the Japanese government's initial agreement to
lend 63 billion yen to Thailand to invest in the Red Line mass transit
route from Bang Sue to Rangsit.
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