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Published on February 7, 2008

They recommended the Bank of Thailand cut the policy interest rate to lift economic growth to 4-5 per cent this year and prevent an influx of capital which could contribute to further appreciation of the baht.

Somchai Pakpatwiwat, an independent economist, be-lieves the new government will put a good deal of effort into lifting the economy with both budget deficits and off-budget spending as a result of the agenda to improve its popularity among grass-roots people and companies of all sizes.

"No matter if the sky falls in or the land collapses, this government will give im-

portance to boosting the economy. The public sector will be working on this as we have never seen before," he said.

Somchai suggested the budget deficit should not be more than 3-4 per cent of gross domestic product, and public debt should not be higher than 38-40 per cent of GDP.

Kanit Sangsupan, director of the Fiscal Policy Research Institute, however, said the budget deficit should be about 2-2.5 per cent of GDP, while public debt should not exceed 40 per cent, compared with the current level of 38 per cent. This would mean a deficit of not more than Bt100 billion, but the level should not be too low, otherwise it would discourage bond-market development.

Kanit said the government could boost the economy with grass-roots policies, as such a move would raise farm income and lift consumption. However, this should not be done for longer than one or two years.

Usara Wilaipich, a senior economist at Standard Chartered Bank, said that while other central banks have been trimming policy interest rates, the Bank of Thailand should slash the key interest rate to reduce short-term inflows. This would slow pressure on the baht's appreciation and prevent the economy growing at a lower rate than expected.

Direct and indirect exports to the United States account for 23.5 per cent of the Kingdom's exports, said Kongkiat Opaswongkarn, chief executive of Asset Plus Securities and chairman of the Federation of Thai Capital Market Organisations.

Anoma Srisukkasem

The Nation