Tue, June 28, 2022


Virabongsa slams govt, BOT for economic distress 

The current economic decline could drag on for the next five years, warned former finance minister and veteran economist Virabongsa Ramangkura who sharply criticised the government's handling of the economy and the Bank of Thailand's failure to rein in the strong baht. 

Delivering his keynote speech at a seminar hosted by the Pheu Thai Party on Tuesday (March 3) , Virabongsa said the sagging economy would likely continue for another five years and poor performance of the Thai economy was mainly due to impact of the global economic slowdown on Thai exports, while the Covid-19 outbreak hastened the decline. 

Business sentiment plunges to lowest level in a decade
The government, he said, lacks confidence in managing the economy as it has no credibility in the eye of the global communities and seen as a dictatorship.
“Over all, Thailand is facing a multi-crisis on the economic, political and rule of law fronts,” Virabongsa noted.
He said the Thai economy depended to a large extent on export performance which accounted for 70 per cent of gross domestic product. Those who say that exports are not the most important aspect of the Thai economy do not understand its structure, he added. 
Virabongsa said he had heard the Deputy Prime Minister's comment that exports were not important as the country could boost domestic demand to revive the economy. “The statement demonstrates ignorance of the one who uttered the words".
He may have outwitted the military but he could not deceive people in the financial market and the manufacturing sector,” said Virabongsa in an apparent reference to Deputy Prime Minister Somkid Jatusripitak who oversees the economic policies of General Prayut Chan-o-cha’s government.
If there were no exports, no foreign tourists, national income will drop to 30 per cent of the current level, he pointed out.
Virabongsa also turned to criticise the Bank of Thailand. The market determines the dollar value of Thai export and import products but Thailand could determine the baht value of those products via exchange rate management, he noted.
The central bank governor, however, did not seem to have sufficient knowledge of the matter as he often said that exports were not affected by the changes in baht value, Virabongsa said.
“If I were the prime minister, I would fire the central bank governor one way or another, despite the Bank of Thailand being an independent agency ” he said.
He claimed that both the government and central bank were ignorant while working together.
Thailand could progress to a developed country status but was stalled by the military coup in 2014 , as Malaysia moved ahead, he said.
The global communities oppose military rules as seen in the refusal of several economic blocs on entering free trade agreements with Thailand, he said.
“Our leader could not participate in free negotiations as he has the title of a general before his name,” he pointed out , adding that even Myanmar now has a civilian government after long periods of military rules.
“Since our political system is not in line with a civilised country, it has always been an obstacle for Thailand to achieve an advance country status. We aimed to become the fifth tiger of Asia but military coup has pulled the country back,” he said while stating that " political system does matter to economic progress".
The government did not fully understand importance of the exchange rate and let the baht surged to become the strongest currency in the world last year. With the government not paying much attention to Thai exports, the country is lagging behind other Asean nations and the country's export value is expected to face negative growth this year, he warned.
Generally, the Thai economy cycle is 10 years, but with the military having managed the the economy for the past five years, the next five years would likely see an economic recession, he said.
While the SET Index and local stock prices have dropped to their lowest levels in four years, they could further drop next month to the lowest points in five or six years as the country has yet to see light at the end of tunnel, he said.
If the current government were elected, it would have been toppled but it has remained in office, thanks to the power of the gun, he said. 
Current economic weakness is different from those we have experienced. In the past, economic woes were mainly caused by the country's failure to export enough products while importing a substantial amount of foreign goods, resulting in deficits of current and capital accounts.
However, Thailand now faces a larger contraction in imports than exports, resulting in trade and current accounts surplus. “The economy is weakening but the baht is strengthening ,” he said.
The situation invited fund managers to speculate on Thai debentures , leading to historic low yield of government bonds. The lower yield of long-term bond maturity than short-term interest rate indicates that the Thai economy will continue to register declining growth rates for many years to come, he said.
Virabongsa does not believe government spending will boost the local economy after the Bt3.2 trillion annual budget has recently been approved. 
Government spending accounts for only 18 per cent of gross domestic product and capital spending is just 20 per cent of total outlays, he explained while playing down 
the effect of the " Eat, Shop and Spend" stimulus scheme.

Published : March 03, 2020

By : The Nation

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