ASEAN KEY DESTINATIONS
Central bank cautions on stimulus
The Bank of Thailand has cautioned against government policies to promote a consumption-led stimulus as it could fuel inflation while failing to lift the country's economic potential.
Prasarn Trairatvorakul, the central bank governor, said the economy was not in need of economic stimulus next year and trends did not warrant it.
Intra-regional trade and emerging markets should help to shore up Thai exports if the United States and Europe lag in their effort to develop a framework to solve their problems, even though the US, Europe and Japan account for one-third of the country's trade.
"Although some people think the government should use fiscal stimulus quickly, fiscal policy can affect the economy quickly by nature. So the government should resort to stimulus spending only when it is really necessary," he said.
Thailand's economy is operating near full potential but it faces inflationary pressure, he added.
Dr. Prasarn urged the government to focus on investment to steer the economy away from export dependence.
Public investment can increase the participation of the private sector, which can increase the overall contribution of investment to economic growth. Investment contributions to economic growth have remained modest since the 1997 economic crisis.
"The government should spend only on necessary projects, placing the proper priority on projects in the next year. The government should improve the country's economic potential with its spending rather than focusing on consumption, which provides temporary impacts," said Dr Prasarn. "Avoid repeating the lessons of the US economy."
Potential investment projects include transport logistics, job training and energy efficiency.
Dr. Prasarn added that the Monetary Policy Committee's decision to increase interest rates in the past had given the central bank appropriate room to execute policy in case of a severe world economic downturn.
Suthapa Amornvivat, SCB's chief economist, said world economic conditions would have a limited impact on Thai growth in 2012, pointing to a projection of 4.5 percent to 5 percent, slightly higher than the expected growth in 2011.
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