Caretaker Finance Minister Thanong Bidaya said yesterday that the budget would be cut if economic growth next year was lower than the 5 to 6 per cent earlier forecasted.

The ministry recently cut its GDP growth forecast for next year to 3.5 to 4 per cent. Lower growth will translate into less tax receipts for the government.

If the government wants to keep its fiscal budget at Bt1.476 trillion, it needs to explain the need to do so to the public, Thanong said.

"If GDP growth in 2007 is less than 5-6 per cent, which was the previous assumption we used to estimate revenues for the next fiscal year, the expense forecast must be cut too. Expenses must be in line with revenues. But if the government plans expenditures that exceed its income, it must explain its reasons," Thanong said.

The GDP forecast, he said, must be made in consultation with the National Economic and Social Development Board and the Bank of Thailand in order to have figures that are in line.

Somchai Sujjapongse, deputy director-general of the ministry's Fiscal Policy Office, said, however, that the government's revenue for the current fiscal year is near its target.

Yesterday, Thanong met ministry officials to discuss the government's income forecast for this fiscal year as well as the budgets for the next three fiscal years.

Thanong said government income for this fiscal year may be lower than its expenditures of Bt1.36 trillion.

However, Somchai said that in the nine-months ended June 30, government income exceeded its target by Bt7.74 billion.

This was despite shortfalls in taxes collected by the Excise and Customs departments. The Excise Department's revenue was Bt27.26 billion short of target due to a cut in the diesel tax of Bt1 per litre, which was introduced to reduce energy costs for the public. Taxes collected by the Customs Department were Bt16.46 billion lower than expected due to tariff restructuring in several industries, including appliances, electronics and printing.

Somchai said the most important factor affecting the government's revenue collection for the remaining three months of this fiscal year was corporate income-tax collections for the first half of this calendar year. The taxes will be collected next month.

Thanong also said the Criminal Court's verdict on Tuesday against the three election commissioners helped pave the way for a general election and would boost investor confidence.

 Separately, Bank of Thailand Governor MR Pridiyathorn Devakula said that private investment was expected to recover soon from the slump caused by political uncertainty.

"Local investment has been slowing down, but it will be better after this," he said yesterday, referring to the date set for a new election and the jailing of three election commissioners for malfeasance in their handling of the April 2 election and its repeat poll. The country's political deadlock seems set to be resolved following the royal endorsement of the October 15 election date and moves to appoint five new members of the Election Commission.

Although the capacity utilisation rate already exceeds 70 per cent - the level at which new investment is generally required - Thai corporations had frozen their investment plans due low confidence, Pridiyathorn said.

Now, however, investment is expected to be a major driver for economic growth while other growth generators, including domestic consumption, decelerate, he said.

Foreign direct investment and capital inflows, on the other hand, have continued despite the political tensions, Pridiyathorn said.

Anoma Srisukkasem

The Nation