"Yes, so far we've been like an aeroplane flying with one engine. Other engines are being ignited," the minister said in a briefing organised by the Nation Multimedia Group, publisher of The Nation.

That one engine has been the export sector, fuelled by positive global demand. Despite the domestic economic doldrums, exports will help the gross domestic product (GDP) grow in the first quarter to reach an annualised rate of 4 per cent, beating market expectations, he explained.

"The country's economic growth will stay at 3 per cent plus in the second quarter and increase in the third and fourth quarters, thanks to government spending, mega-infrastructure projects, private investment and the downward trend in domestic interest rates," said Kosit, who was executive chairman of Bangkok Bank before he was asked to join the Sarayud government last year.

Of the challenges facing the government's economic policy, Kosit conceded that domestic demand, which is linked to consumer confidence, is the hardest to put right. Impediments to government spending have been dismantled, while measures to encourage investments by major firms have been hastened and will start to yield results.

"Remember that we came into government unprepared. We were left with more than Bt100 billion worth of excess debt from the previous government, but we're not politicians, and we are prepared to do the right thing for the long-term interests of the country. That means we do not resort to populist measures, only sustainable ones," the minister said.

He hinted that it was more than easy to pump money in at the grass-roots level to propel domestic demand and spur investment by small and medium-sized enterprises, but he returned again and again to the idea of sustainable growth, spending and investment through "productivity" and not "hot money".

Kosit said the government had overhauled Thaksin's populist policy with the aim of strengthening the community in the long run. "We don't want to give people only grass-roots money; rather we want them to think about how to solve problems so they learn to develop themselves. I know people would prefer the previous programme to the current government's scheme," he said.

Asked about strong criticism of the snail's pace of the current government undertaking its policy, Kosit said none of the ministers had expected to be managing the country, so implementation would take some time. "In addition, I'm a practitioner, so I am quite prudent and don't like to say much before doing," he said.

The economic fallout from the coup began to bite in the first quarter, worsened by the New Year's Eve bombs in Bangkok. Earlier, the Kasikorn Research Centre predicted the country's first-quarter GDP would drop to 3 per cent, from 4.2 per cent quarter on quarter and 6.1 per cent year on year. The Bank of Thailand recently lowered its economic-growth target this year from 4-5 per cent to 3.8-4.8 per cent.

"Thailand's economy remains in a healthy condition. It is adjusting and does not need any medicine, because it can recover by itself. I view conservatively that the country is recovering and not in recession," Kosit said.

He laughed off predictions by some academics that unemployment was growing. "No, in fact we face an employment shortage. Thailand is also the biggest importer of foreign labourers in the region," he said.

Kosit disagreed with economists who say the loss of confidence in Thailand is one cause of the economic doldrums and conceded the change in government following the September 19 coup had left a vacuum in government spending that he and his team had worked to put back on track.

Private investment dried up, and major projects were put on hold.

This is highlighted by the pollution problem at Map Ta Phut in Rayong province.

"We took time to manage the pollution problem at Map Ta Phut, and the government has just approved a Bt300-billion petrochemical investment plan for the area," he said.

The recently approved petrochemical projects of PTT and Siam Cement in the Map Ta Phut Industrial Estate will start construction in the third quarter, and this driving force will coincide with the start of bidding for the government's infrastructure mega-projects in the same quarter.

"If the loan from the JBIC [Japan Bank for International Cooperation] cannot be signed in August, we'll go for local financing, which we can afford - and it might even have a positive effect on encouraging foreign-exchange spending, which would ease pressure on the appreciating baht," said the minister.

"Interest rates are now on a downward trend. It will take about six to nine months to see the impact on stimulating consumption, and it will be clear in the fourth quarter," he said.

To accelerate spending, the government has asked all ministries to speed up their investment budgets next month, and their budget surpluses from this period will be used to hold several events to encourage consumption.

Oranan Paweewun

The Nation