THE GOVERNMENT will never launch any economic stimulus measure that would promote consumer overspending despite the current economic slowdown, Finance Minister Sommai Phasee affirmed yesterday.
From now on, the government will not try to stimulate people’s consumption, which may lead to overspending, since household debt has exceeded the equivalent of 80 per cent of gross domestic product (GDP).
However, state spending and investment would be raised, he said.
The Fiscal Policy Office (FPO) expects the economy to perk up by 3.9 per cent this year, even though exports have contracted in the first two months.
The rosy forecast is based on expected improvement in tourism, budget disbursement as targeted, including for the Bt40-billion water management and road improvement projects, which are expected to kick off in the third quarter, and liquidity injections in village funds across the country.
According to the International Monetary Fund (IMF), household debt usually hovers at about 60 per cent of GDP.
However, “our debt level is higher than that due to stimulus through populist policies. That’s not right. We have to save money if we are in high debt. The government also must find ways to boost people’s income through state spending in both the recurring and investment budgets,” he said.
Thailand’s economic slowdown has followed other countries around the world. In the past seven years, the Thai economy has expanded at a decelerating gait, paralleling the expansion in international trade. The IMF believes that the heady days of rapid economic growth may be over.
“In the next periods, very high economic growth will end. A country experiencing 5-7-per-cent growth may see only a 2-4-per-cent figure. Those likely growing at 5-7 per cent will be small countries like Laos, Cambodia and Myanmar.
“It’s quite difficult for China, which used to see 9-10 per cent growth, to expand 7 per cent. It’s also good for Thailand if it can grow 2.4 per cent,” he said.
Krisda Chinavicharana, director-general of the FPO and ministry spokesman, said the economy is expected to grow as targeted at 3.9 per cent for the whole of 2015.
Although exports shrank in the first two months, other economic indicators including tourism and manufacturing still improved.
Demand for people's spending
Growth this quarter is estimated to be higher than the 2.3-per-cent level of the fourth quarter of last year, Krisda said.
The FPO will reveal its revision of key economic figures late next month.
In February, Thailand welcomed 2.69 million foreign tourists, up 29.5 per cent year-on-year. For the first 13 days of March, 1.1 million tourists came into the country.
The manufacturing production index also was positive for the first time in 22 months at 3.5 per cent in February.
State disbursement, particularly for the investment budget, tended to improve on the Budget Bureau’s expectation of meeting an 87-per-cent target for the total investment budget, while the FPO forecasts only 70 per cent.
Other planned investment projects include the improvement of water systems and roads with a Bt40 billion budget and the recapitalisation of village funds through the government budget and loans. These are expected to get off the ground in the third or fourth quarter.
February’s imports of consumer products jumped 32.5 per cent, reflecting demand for people’s spending.
However, economic indicators last month continued signalling a slowdown in private consumption, private investment and exports.
In the month, VAT collection at constant prices for domestic consumption grew 2.4 per cent year-on-year, compared to 9.5 per cent in the previous month.
The consumer confidence index for the economy declined for the second straight month in February to 68.4 on concerns over the economic recovery and low crop prices.
February’s private investment continued slowing down, as manifested by a 2.4-per-cent contraction in cement sales. Commercial car sales also shrank by 9.6 per cent year-on-year. However, imported capital goods expanded 5.9 per cent year-on-year.
Thailand, in the month, continued to run a budget deficit, hitting Bt8.5 billion. Unemployment stayed at 0.8 per cent of the country’s workforce.
Headline inflation lost 0.5 per cent following recent drops in global crude prices. Thailand’s foreign reserves stayed at US$156.9 billion, about 2.7 times current liabilities.