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NEWS UPDATES Asean Affairs         1  July  2011

Thai bank governor cautions on fiscal crisis

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Thailand risks slipping into a fiscal crisis as in Western economies, eroding consumer power if the new government substantially expands fiscal spending as many parties are promising, Bank of Thailand governor Prasarn Trairatvorakul has warned.

The 2012 annual budget, which will have to be finalised by the new government, should not allow the deficit to exceed the 350 billion baht (US$11. 37 billion) as planned currently, he said yesterday.

The government should also avoid huge spending by other fiscal means or short-term measures to inflate people's incomes, he added.

"The fiscal deficit should not be extended much more [than 350 billion baht in the next fiscal year]. There is no need for much more economic stimulus. Otherwise we are sending inappropriate signals to the market while inflation risks are already high," said Dr Prasarn. "The economy has sound growth momentum, but inflation risks persist."

High food and fuel prices as the economy percolates have led the central bank to increase the policy interest rate by a total of 1.75 percentage points to 3% since July last year.

Not surprisingly, generous campaign promises have run counter to plans for a balanced budget, excluding debt repayment, by 2015. Some of the more substantial short-term public spending plans involve simultaneous investments in transport routes and big increases in the minimum wage and salaries of new graduates.

Dr Prasarn added that Thailand's ageing society was placing more pressure on fiscal expenditures. The UN notes that 100 workers in Thailand shoulder the entitlement burden of 13 retirees now. That number will increase 17 retirees over the next 10 years and 26 in two decades, said Dr Prasarn.

The central bank governor brushed aside a proposal to peg the baht to a range of currencies, saying the bank was helping the export sector by constantly buying US dollars from the market.

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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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