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Published on August 29, 2007

Between Bt30 billion and Bt40 billion is likely to be pumped into the economy around the December 23 general election, which will help stimulate domestic spending and improve economic growth prospects, according to the University of Thai Chamber of Commerce.

Thanawat Phonwichai, director of the Economic and Business Forecasting Centre, said the campaign finance should boost economic growth by 0.2 per cent.

The Election Commission will spend Bt1.9 billion to organise the general election. But political parties will spend up to Bt40 billion on campaigning and other costs associated with the election.

The money spent during the election season could help rescue the country from its economic doldrums and declining consumer confidence that has been caused largely by political uncertainty.

"We expect that a large sum of money will be spent be-cause the competition among the political parties will become very strong," Thanawat said.

An analyst at Credit Suisse said in a report yesterday that a December 23 election was in line with financial market expectation. "I see little risk of delay. I reiterate my view that the general election should be a positive catalyst to help drive consumer confidence and bring an investment sentiment rebound," the analyst said.

The Bank of Thailand's Monetary Policy Committee is today scheduled to meet to decide whether to reduce the interest rate to stimulate the economy amidst the global impact of the US sub-prime loan problems.

Usara Wilaipich, a senior economist from Standard Chartered Bank (Thailand), called for a rate cut by 25 basis points to boost the economy for the rest of the year.

"Now that we are going to have the election, the interim government is unlikely to make any decisions on big projects between now and then. It would prefer to leave the projects to the next government," she said.

"The only means that we have to boost the economy is monetary policy or the interest rate. Therefore, the central bank should cut the rate by 25 basis points or 0.25 per cent to sustain the economy for the remainder of the year because it would be too late to wait for the next MPC meeting on

 

October 10," she said.

Thanawat said many Thais believed the economy would pick up in the fourth quarter, and economic growth by the year-end should be 4.1 per cent compared to the original forecast of 3.8 per cent.

He said the economy in the third quarter would continue to be sluggish due to the ongoing problems of the baht's rise, the unstable political situation and the lack of operator and consumer confidence.

Ajva Taulananda, CP Group's vice chairman, believed the recent clearer political situation and a government announcement of a national election date of December 23 could improve the economic growth of the kingdom.

The clearer political scene should increase domestic consumption after the  drop in the first half of the year. The group's domestic business should grow by 10 per cent this year along with the recovery of consumer confidence, he said.

Ajva was also optimistic that the country's economic growth would reach 4 per cent this year.

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