Thirachai warns govt on household debts

Thirachai Phuvanatnaranubala, a former Bank of Thailand deputy governor and former finance minister, has shot off a warning to the government over household debts, which could be aggravated by its populist policies, while urging people to be cautious in their spending and savings.

Speaking to Krungthep TV's "Business Talk" show recently, Thirachai said public debt and private borrowings would be this year's risks.

He expressed concern over household debts as government expenditure could stimulate household spending and borrowings.

People borrow from commercial and state-run banks for spending on goods and services. If there is a temporary economic slowdown, households could find it difficult to repay these loans and may have to find money through the underground system.

Thirachai suggested that relevant authorities warn households to be careful about their expenses.

"If about 70-80 per cent of your total income goes on regular expenses, you should be very careful about the remaining amount. Don't take any risks or any speculation," Thirachai said, adding people should have some money saved for the unexpected.

Another problem is that there is no requirement for the government to reveal public-debt figures on a regular basis, he said, and such unclear figures added to concerns about the monitoring and analysis of the economy.

Thirachai also warned the government to be cautious about economic stimulus through populist policies as these could end up merely fuelling consumption without strengthening the economic foundation.

He urged the government to avoid borrowing and, instead, finance populist projects through taxes and announce the sources of project financing to the public. Such requirements should be enshrined in the Constitution.

Amid concern over supervision of the fiscal stimulus, Thirachai suggested that every government announce in Parliament its revenue and debt targets, and this requires a constitutional amendment.

He also expressed much concern over bubbles in the economy, particularly property and condominium projects in Bangkok, as their numbers are rising significantly.

Another concern many ignore is Thailand's competitiveness, which requires more planning and increases in productivity, he said.

On concerns about capital movement, Thirachai foresees more foreign capital flowing into Asia, where economic growth is higher than elsewhere. The US is quite clearly recovering now, but Europe may take time to find solutions for its sovereign debt crisis, and this could have an impact on Thai exports, he said.

However, Thirachai suggested that people should avoid borrowing for stock investment when the stock market is volatile.

With his central-banking and finance-minister background, Thirachai is amply qualified to author a new book on amending the Constitution and sustainable economic conditions.