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In the beginning of 2009, there were indications that the global economy was still contracting. It was forecast that the US, EU and Japanese economies would further contract at as high a rate as that of the last quarter and would keep the global economy contracting at the rate experienced in the last quarter, which has been the highest rate of contraction since World War II. As a consequence, Thai exports in the first quarter of 2009 would reduce at a double-digit rate. Industrial production, which reduced markedly in the last quarter, down to 62 per cent of capacity (as compared to about 75 per cent last year) would reduce further in this quarter. Despite trying hard not to lay off their employees in such a business environment, many industries would finally have to do so. The world economy is expected to contract further and bottom out in the third quarter of this year, and it would take another 1 to 2 years to recover. Therefore, it would take at least 2 to 3 years from now before our exports could recover their previous high. The question is "what should we do with our economy so that Thais would be least affected?"

The effect on the Thai economy this time has been on exports, which have reduced sharply, leading to a big reduction in industrial production and employment, while the price of goods has not increased as the inflation rate is now very low and the financial institutions are still healthy. Therefore, salary earners like government officials and employees of state enterprises, financial institutions, and companies doing domestic businesses are not much affected. However, some employees in export industries would be laid off, while some hotel employees may lose their jobs. Restaurants in tourist spots would have lower sales and vendors who bank on purchases by tourists would have much lower income. Current farm prices, though having decreased from last year, are still higher than the prices in 2007. If proper measures are implemented to prevent further reduction of farm prices from the current level, farmers in Thailand this year would earn adequate income. People who would need help are those being laid off from export and tourist industries. It is necessary that the government creates jobs for the laid-off staff as soon as possible. Mega-projects such as mass transit system and big water transport systems should be speeded up. However, these projects do not create a large number of jobs. It is necessary that more small-sized construction projects are introduced. Those projects include the construction of school buildings, hospital buildings, or local roads, which people are waiting for and have been already in the budget pipeline for the next 3-4 years. If these small construction projects are speeded up for implementation this year or in the next, a considerable number of jobs would be available throughout the country. However, since the expected lay-offs are quite big in number, these construction jobs could only absorb a part of it. The remaining labour would naturally go back to the agricultural sector, their home base, as it happened after the 1997 crisis. Luckily, after that crisis the industrial sector could recover fast as the major economies, the big buyers of the world, were still very healthy. Exports increased very fast and pulled Thailand out of the trough. Industries recovered and absorbed back all the laid-off employees within a year's time. The agricultural sector did not have to carry the burden of the excess labour for too long. The key questions now are: how long the agricultural sector has to be burdened with such excess labour? Would the export industry recover to become the main growth engine it used to be?

As explained above, the economic crisis this time is very serious with recession so deep that it would take 2-3 years before our exports could regain their former peak. The agricultural sector has, therefore, would have to take care of the excess labour longer than during the last crisis. Nevertheless, what worries me most is my hunch that, as this crisis has affected a lot of people in the major economies who have over-consumed, the consumer behaviour in those economies may change. Consumerism, which was a way of life in the major economies, may fade away and people would be more careful in their spending, which is the right way of life anyway. Under this scenario, it would, therefore, take much longer than 2-3 years before our exports could return to their former peak. The agricultural sector would even have to carry the burden of the excess labour for a much longer period of time. It is hence necessary to ensure that the farm income will be increased enough to take care of the additional labour. Worse is that, as consumerism subsides in the future, exports may not be growing as fast as it used to. We may need to beef up domestic demand as another growth engine for our economy.

Increasing the farm income is a desirable way to strengthen domestic consumption as another growth engine to work alongside exports. This is a very important matter that deserves political attention. Whether export could recover to be a strong growth engine or it would slow down due to the change in consumer behaviour, measures to increase farm income are necessary as it would strengthen the farm sector, improve income distribution, and reduce the risk of being too dependent on export as a growth engine. Our economy would become more resilient. The next question is what we should do to improve the farm income. The answer will be presented in this column next Monday.