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Prime Minister Abhisit Vejjajiva has said that a stimulus package of up to Bt300 billion was being considered for next year to help the country cope with the effects of the global economic downturn.

Teerana Bhongmakapat, dean of Chulalongkorn University's faculty of economics, warned that if there were rampant corruption in the proposed Bt100-billion supplementary budget that had already been agreed - and which would form part of the Bt300 billion - the economic benefits would be significantly diminished.

The government should focus on specific targets in its stimulus package, he said, adding that a personal-income-tax cut could be more effective than fiscal spending in stimulating growth.

"If the government does not have really good and effective projects, it should return the money to the taxpayers. A tax cut would boost consumption," he said.

He urged the government to restructure tax policy and transfer wealth from the rich to middle- and low-income groups.

So far, tax policy has favoured upper-income groups, such as giving tax breaks to those who invest in long-term equity funds and retirement mutual funds, Teerana said.

Ammar Siamwalla, an economist at the Thailand Development Research Institute, is also sceptical about the proposed measures.

For example, the government plans to cut the tax rates for small and medium-sized enterprises while asking state-owned banks to provide more loans to SMEs to boost their liquidity amid the credit crunch.

However, Ammar said there had been little reliable information about the state of these SMEs, which made the basis of public policy for this sector questionable.

In his opinion, about half of the SMEs are in the retail sector, in which they have faced fierce competition from the giant chains.

He also expressed doubt on the government's plan to give a monthly Bt500 each to eight million elderly people, as this may cause a long-term fiscal burden.

Instead, the government would be better off creating mechanisms that promote savings for retirement.

He also suggested that small projects, such as renovating schools across the country, could yield quicker results in stimulating the economy than mega-projects.

Atchana Waiquamdee, deputy governor of the Bank of Thailand, said it would take longer than previously expected for the global economy to recover, due to the combined effects of the recession that is hitting several major economies and the credit crunch.

Meanwhile, Government Savings Bank president Lersak Julates said yesterday that the bank was ready to lend more to grass-roots people, through the village fund and other credit-extension programmes.

He said the bank now had more than Bt10 billion in excess liquidity, and this should increase next year. The GSB expects to lend Bt65 billion in 2009, up 10 per cent from this year. Over Bt40 billion is earmarked for grass-roots people and small borrowers.

"It's up to the government to decide to what extent the GSB should help. We've yet to discuss this with the Finance Ministry," he said.