Abhisit, Opposition differ on recovery

"The economy is expected to grow 2-3 per cent next year," the PM told lawmakers during the first reading of the Budget Bill for fiscal 2010, which starts in October.

The economy has been hit hard by the global crisis, causing gross domestic product (GDP) to shrink 4.2 per cent year on year in last year's fourth quarter and 7.1 per cent in this year's first quarter as exports and tourist numbers dropped sharply.

The economy will, however, start to expand in the final quarter of this year, Abhisit said.

Yesterday was the third day of debate on financial legislation, during the first two days of which the government succeeded in getting its loan package worth of Bt800 billion passed by the House of Representatives. The funding will be used to finance public investment worth Bt1.43 trillion between 2009 and 2012.

Abhisit said the government had set expenditures of Bt1.7 trillion for fiscal 2010.

The government still plans to run a fiscal deficit of Bt350 billion - equal to 3.8 per cent of GDP - as it intends to use public spending to boost the economy.

It projects revenue of about Bt1.35 trillion for the next fiscal year.

Breaking down the planned expenditure for fiscal 2010, the largest share is spending on routine activities like civil servants' salaries, accounting for 84.5 per cent, or Bt1.44 trillion, of the total.

Capital spending accounts for only 12.5 per cent, or Bt212.6 billion, while principal debt repayment accounts for the remaining 3 per cent.

Abhisit said public investment in the period would not, however, be insignificant when investment under the second stimulus package worth Bt1.43 trillion was included.

The easing of monetary policy, with the central bank having brought the key policy interest rate down to 1.25 per cent, should also contribute to economic recovery, he added.

The premier also pointed to the country's large foreign reserves of US$120.2 billion (Bt4.1 trillion) as of May 29 as an indicator of sound fundamentals.

Under the expenditure plan, Abhisit said the government would have a programme to produce 2 million skilled workers in a move to address the labour shortage.

It will also spend Bt114 billion to boost confidence and resolve political conflicts by promoting the tourism industry and investing more in the troubled South, as well as in communities across the country.

For the opposition, Pheu Thai Party MP Surapong Towijakchaikul said he doubted the economy would recover next year. He pointed to the experience of the 1997 economic crisis, when it took three years before recovery was possible.

"You dream, as you think you can increase public expenditure in 2011, but I bet it will be smaller than Bt1.7 trillion," said Surapong, who took a leading role in the House debate for Pheu Thai.

He calculated the government would need to borrow between Bt1.6 trillion and Bt1.78 trillion, taking into account the budget deficit, the Bt800 billion in loans and other anticipated borrowings in the next few years.

The average taxpayer currently has to shoulder public debt of Bt50,000, but Abhisit will increase that amount by Bt30,000 for each person, he said.

Surapong also criticised the government, which won House approval for the bill to borrow Bt400 billion in three straight readings during Tuesday's session, for tabling legislation that lacked transparency.

Pheu Thai MP Chalerm Yoobamrung said government expenditure for fiscal 2010 was too concentrated on routine spending, with little left for investment.

He also charged Abhisit with having failed to campaign against the drug trade and solve the unrest in the deep South.