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Raise spending to reduce impact, says Thai deputy premier


October 27, 2008

Financial Crisis Impact:
Raise spending to reduce impact, says Thai deputy premier

Thailand could reduce the impact of a severe global slowdown on its economy by aggressively raising government and private spending over the next year, Reuters quoted Deputy Prime Minister Olarn Chaipravat as saying Sunday.

Despite diminishing foreign investment and falling exports to big markets, Thai economic growth could at least reach four percent in 2009 with the help of 1.2 trillion baht ($35 billion) of additional government and private expenditure next year, Olarn told a television programme.

The Bank of Thailand has forecast gross domestic product growth of 3.8-5.0 percent for 2009, against projected 4.3-5.0 percent this year and 4.8 percent in 2007.

Olarn, a former private banker who joined the cabinet last month to oversee government economic policies, said one third of the total "stimulus spending" next year would come from the private sector with the rest from state budgets, local and foreign borrowings.

A substantial portion of government spending would go towards boosting incomes of rural Thais through rice, maize and rubber price guarantees, and promoting private and small household businesses.

"About 100 billion baht from fiscal or state enterprise budgets, and local and foreign loans, would be disbursed for mega infrastructure projects next year," Olarn said, referring to rail mass transit lines in Bangkok, rural road and irrigation projects.

"This spending would not greatly affect the government's fiscal position as part of it would be met by higher tax revenue to be collected as the economy and private business benefit from the extra spending."

Olarn, who heads the government's economic team, said Thailand would seek to step up exports to Asian neighbours, the Middle East and Africa, the regions less affected by the global economic turmoil.

The deputy prime minister said a 30 percent plunge of Thai stock prices in the past month offered good long-term investment opportunities for Thai bargain hunters who he estimated would probably spend about 100 billion baht buying cheaper stocks over the next 12 months.

The central bank forecast in mid-October that Thai export growth would fall to a 7-10 percent range in 2009 from 20-23 percent expected this year due to shrinking demands from big markets like the United States, the European Union and Japan.

Olarn called on Asian countries, led by China and Japan, to inject $350 billion of additional liquidity into their economies to ensure that they and Asian businesses could withstand the credit crunch.

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