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NEWS UPDATES Asean Affairs           3   August  2011

New government to stimulate Thai economy

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Thailand's economy may grow by only 3 percent to 3.5 percent this year if the new government fails to strengthen the domestic economy, which is currently pressured by slowing export growth, rising oil prices and high inflation.

Most economists are predicting gross domestic product growth of 3.5 percent to 4.5 percent.

But Kanit Sangsubhan, director of the Finance Ministry's Fiscal Policy Research Institute, says a number of factors including US economic trends could cap Thai economic growth.

The US government is likely to issue bonds after approving an increase in the public debt ceiling, he said.

"The problem is no one wants to buy US bonds, so the US Federal Reserve will have to buy them.

Then a third round of quantitative easing will be implemented to stimulate the economy. The problems will likely expand to Europe," said Dr. Kanit.

He expects a flood of capital into Thailand, which along with soaring prices of oil and gold will put upward pressure on inflation.

Rising prices of food ingredients against a backdrop of slowing exports to the US and Europe will force Thai exporters to focus on Asian market.

Dr.Kanit said the new government should quickly strengthen the domestic economy and deal with inflation.

He urged close monitoring of supply and demand related to 13 items that influence inflation and said the government should better manage selected products to prevent shortages and price increases.

Pig exports, for example, have caused domestic pork prices to spike, so the government must limit these shipments, said Dr. Kanit. The Pheu Thai Party's pledge to reduce fuel levies collected by the state Oil Fund will help to ease oil prices and transport costs.

"If the government can keep inflation at only 1-2 percent a year while lifting people's incomes, then Thai economic growth could even reach 6 percent annually," said Dr Kanit.

He said the government must have parallel policies to keep inflation low while raising income levels for people in order to allow them to enjoy the benefits of economic growth, which will create a multiplying effect on the economy.

The domestic economy will be strong enough to withstand any effects from global turmoil if the government actually follows up on its pledges to mortgage paddy rice at 15,000 baht a tonne, raise the daily minimum wage to 300 baht and start out new university graduates at a 15,000-baht salary, said Dr. Kanit.


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ASEAN  ANALYSIS

This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More

 

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