Commenting on the 10th anniversary of the 1997 crisis, Finance Minister Chalongphob Sussangkarn said the Thai economy had become stronger than a decade ago as all parties had learnt hard lessons from past mistakes. These included mismanaging the exchange rate policy, the accumulation of short-term foreign debts and lack of transparency in economic information. "However, we should not be over-confident, and have to be prepared for any crisis that may come from other external factors," Chalongphob said.

Capital flows in recent years had become highly volatile and posed a big risk to Thailand and the world economy. The United States had been running budget and current account deficits, while East Asia had accumulated exceptionally high foreign exchange reserves, of about US$2 trillion through export surpluses.

Chalongphob said that if global imbalances continued and every country let the market make its own correction, the US dollar could crash. If the dollar fell sharply it would hit export markets in East Asia and other regions because the US was still the world's major market.

If that were to be the case, then the world economy would contract sharply and all countries would be negatively affected.

To prevent such a scenario, international cooperation was needed to undo global economic imbalances in an orderly fashion, he said.

Chalongphob was optimistic that countries in East Asia had started to consult and exchange opinions on this matter, including how to coordinate exchange-rate policies.

He said the baht had been quite stable since the beginning of the year, after the central bank imposed capital controls and cut interest rates.

Thailand and the whole of East Asia needed to learn from the experience of Latin America, which also faced an economic crisis, he said.

On Sunday, Chalongphob attended the World Economic Forum in Singapore. He said policy-makers needed to consult and listen to people from other countries to gain experience in risk management.

Chalongphob also said a possible threat to Thailand could come from a budget deficit if the next government tried to initiate populist policies. To prevent this, information had to be disclosed in order to monitor actual budget spending, and "off-the-balance-sheet" state spending.

If the public had access to information, it would create a check-and-balance system in fiscal policy, and allow credit rating agencies or economists to voice concerns. Elected governments usually launch populist policies to gain popular support.

Chalongphob said the ministry was developing a transparent system for public spending that would be part of an overall economic surveillance system.

He also said that if the new constitution and general election could not end political uncertainty, it might have further negative effects on the Thai economy.

Wichit Chaitrong

The Nation