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5 June 2009

Thai finance minister upbeat over economy

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Thailand’s economy is over the worst of its first recession in a decade and government spending on “shovel-ready” projects will help spur demand and create jobs, Bloomberg News quoted Finance Minister Korn Chatikavanij as saying.

“We’re not out of the woods,” Korn said in an interview in Bangkok today. “But I’m confident we’ve seen the worst. The government is functioning, we’re ready to implement the second stimulus package, everything is moving progressively in the right direction.”

Thailand’s government began pumping cash into the economy with handouts to the nation’s poorest in April after the global recession led to a collapse in exports, and violent political protests sapped domestic confidence. While the economy isn’t likely to return to growth until the fourth quarter, the central bank has said there are signs the worst is over.

Gross domestic product shrank 7.1 percent in the first quarter, pushing Thailand into a recession. The economy’s showing a more “moderate contraction,” the Bank of Thailand said May 20 when it kept borrowing costs at a five-year low of 1.25 percent, ending its most aggressive string of interest-rate cuts ever.

“It should be the end of the easing cycle,” said Julia Goh, an economist at CIMB Investment Bank Bhd. in Kuala Lumpur. “The central bank still has room to cut the rate if there is a strong need to do so, like if fiscal spending fails to come through.”

Prime Minister Abhisit Vejjajiva’s government on May 6 unveiled a 1.4 trillion-baht ($41 billion) investment plan that it plans to implement by the end of 2012. His seven-party coalition government is strong enough to pass a borrowing plan and next year’s 1.7 trillion-baht budget, Abhisit said May 20.

“The main challenge for the government actually is implementing the investment programs,” Korn said today, adding spending may top 1.56 trillion baht. “We will give special attention to make sure the money can be spent.”

The government may borrow about 800 billion baht locally by 2011 to finance the projects, Korn said. A court ruling yesterday eased the way for an initial tranche of 400 billion baht to be raised without legislative approval.


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