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Published on March 5, 2008

 The government will be doing everything to restore investors' confidence and pursue a pro-growth policy. The return of ousted prime minister Thaksin Shinawatra casts a big shadow over every policy.

The government intends to drive the economy to grow at 6 per cent. It has made known its commitment to invest in mega-projects, apart from reviving populist policies to stimulate consumption among the grass roots. On Monday, the banking authorities, acting under political pressure, removed the capital controls that represent the remnants of the Surayud Chulanont government. The Finance Ministry would also like the Bank of Thailand to cut interest rates, in order to boost economic growth.

And today, the Cabinet will introduce a tax-cut package that lowers taxes for low-income earners, hands out more personal income tax rebates, brings down corporate income tax for newly listed companies, cuts business taxes for property developers and reduces transfer fees for both developers and home-buyers.

 But on Monday, Citigroup's Thailand Strategy report warned that the short-term outlook might be buoyant, but medium- and long-term prospects did not look all that positive. First, it will take time to implement the mega-projects. Second, last month's 20-month record-high inflation rate of more than 5.4 per cent will keep consumers at bay. Third, any attempts to interfere in the judicial system on behalf of Thaksin will backfire politically. Fourth, the People Power Party may be dissolved.

thanong@nationgroup.com

The Nation