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Published on November 30, 2007

Although some economists have warned the new government to be cautious before implementing populist policies, Puea Pandin Party economic adviser Vijit Supinit suggested yesterday that it go all out with populism to jump-start the economy and ensure that growth tops 5 per cent next year.

Speaking at a seminar on economic prospects, former Bank of Thailand governor Vijit said populism would be necessary.

"The government should not fear implementing populism," he said. "In fact, it is effective to spread wealth to the grass-roots level."

Earlier, some economists warned that if the government implemented all-out populism, it might find it difficult to turn back to the market economic system where competitiveness is the key.

However, Vijit viewed that fiscal expansion was necessary. He also urged the Bank of Thailand not to raise the interest rate next year in spite of concerns over the rising inflation rate.

Vijit said real recovery was unlikely to happen until 2009. The University of the Thai Chamber of Commerce (UTCC) yesterday predicted the economy next year should grow by 4.6 per cent, compared to 4.2 per cent this year. But Vijit said the economy should grow by at least 5 to 7 per cent. "Even 5 per cent is too small," he said.

Supachai Pisitvanich, another Puea Pandin Party economic adviser, echoed Vijit's view. A former permanent secretary at the Finance Ministry, he said the government should implement fiscal expansion and widen the budget deficit from 1 per cent of gross domestic product to 3 per cent to stimulate economic growth.

Earlier in the day, UTCC's Business Forecast Centre predicted the economy next year would grow by 4.6 per cent, a slight increase from 4.2 per cent expected this year.

Thanawat Pholwichai, a director of UTCC, said economic growth would be undermined by several factors such as rising oil prices, the exacerbation of the sub-prime crisis and a slowdown of exports because the baht is set to appreciate more against the dollar next year.

Stock Exchange of Thailand chairman Pakorn Malakul Na Ayudhya said foreign capital inflows to the stock market next year should be slightly more than this year's Bt80 billion.

He suggested the government promote privatisation by bringing in more companies to the market to increase market capitalisation in the same fashion as the Malaysian stock exchange.

Kanit Sangsubhan, director of the Fiscal Policy Research Institute, said economic uncertainty would be high next year. No one can predict where oil prices will go to because they are highly volatile. Besides, the impact of the sub-prime crisis is still unclear. Most people have predicted it will be worse.

Nonetheless, he said the government still had room to deal with oil prices as currently the excise tax charged on one litre of oil is Bt3.3, in addition to the contribution to the Oil Fund of Bt1.50 per litre. Therefore, the government may have some room by reducing tax collection to curb rising oil prices.

Although the Finance Ministry earlier predicted that the economy might grow by 4.5 to 5.5 per cent next year, the actual growth rate might not reach 5 per cent because of several economic uncertainties, Kanit added.

Wichit Chaitrong

 The Nation