Outside View

Dear Khun Korn,

I am confident I am not the only one who enjoyed your speech at the dinner reception hosted by ACI Thailand last Tuesday in Bangkok. It was an enlightening session, although a bit short, as you were in a hurry. The title of the speech "800 billion: Crowd In or Out" is a catchy one, and the speech also gave us in the audience many things to consider back home afterward.

We know from the session that you have a strong belief in a V-shaped recovery.

To me, however, this remains to be seen.

Whatever it shape it takes - a V, U or even W - no one can deny we are on a path to recovery. The only difference is the degree of bumpiness in the road.

For Thailand, I believe the road will for sure not be that smooth.

Why? As far as economic issues are concerned, running a huge budget deficit will potentially create an internal imbalance for many years.

Potential economic hardships, such as raising taxes to finance such a deficit and inflationary pressures from excess money supply, will require good coordination between the Finance Ministry and the central bank, as well as concerted efforts by both agencies.

I am also confident your initiatives in Operation Thai Khem Khang (TKK) will provide a good boost to the economy.

Also, in the later stages the potential trade deficit resulting from Operation TKK will also pressure the baht to weaken to a difficulttocontrol level, creating an external imbalance. The economy may then be faced with twin deficits.

You may argue we do not have many choices. I agree. I only hope Operation TKK makes an impact big enough to stimulate our economy, so that we can generate enough income to finance the twin deficits.

The process should be smooth enough so that people can tolerate the possible hardships. Otherwise, the old problems of three decades ago - high inflation and high interest rates - will haunt us again.

Technically, the strategies and tactics adopted by the Public Debt Management Office are timely and well planned.

However, as you said, the classic problem of the Thai bureaucratic system - slow budget disbursement - will only diminish the positive effect of the operation.

It seems to me there is not much chance of changing this, and we'll have to live with it. Also, your prediction of the fiscal deficit returning to neutral by fiscal 2015 seems a bit challenging to me.

I am not convinced the economy can return this huge deficit back to a balanced budget by then.

While you believe the Bt800 billion baht will be crowding in rather than out, I think a mild crowding out, if that is the case, would do no harm, but rather reflect a signs of recovery.

he Bank of Thailand must react smoothly and in a timely manner to tame the effect in such a way that the economy can withstand the consequences of higher interest rates.

There was one issue I noticed no one dared ask you about. How does the political situation affect your endeavours? Could a political "accident", such as the dissolution of the House, disrupt all of your plans and Operation TKK? Do you have a way to safeguard your brainchild initiatives from possible "cleansing" by a new government that is not a Democratled one?

Having said all of the above, as one of the taxpayers of this country, I endorse your initiatives and plans. I am ready for any consequences raised above and would like to give you my moral support.

There is one last suggestion I would like to make. You may need to speak more to the people using simple layman's language.

People normally tend to overlook this kind of difficulttounderstand economic news and explanations about it. I do not want to see a repeat history of what happened to former finance minister Tarrin Nimmanahaeminda happen to you.

I think he had to make many tough decisions in laying a foundation for the economy. In the end, he got the stones, while the following government got the jewels.

Good luck.

Views expressed are the author's own.