Thai Rak Thai pays little heed to IMF plea

February 14, 2001

THE International Monetary Fund has urged the Thai Rak Thai government to inject massive amounts of money - possibly to the tune of Bt100 billion - to jump-start the economy, warning that failure to do so might derail this year's economic growth expectations.

A Thai Rak Thai official said the IMF's Thailand representative, Lorenzo Giorgianni, made the suggestion to senior party members about two weeks ago, but the party's reaction was lukewarm.

The IMF was afraid that with the bumpy economic landing in the US, the recession in Japan, and moderate growth in Europe, Thailand could not rely on exports as the engine of growth, as it has over the past three years. A Bt100-billion fiscal stimulus package would yield growth of at least two percentage points.

The World Bank is sending out a similar signal.

Credit Lyonnais has projected the growth in gross domestic product (GDP) might slide to 2.5 per cent this year. Other research houses give the figure at 3.5 per cent. Supavud Saicheua, of Merrill Lynch Phatra Securities, warned that if economic growth failed to reach 4 or 4.5 per cent, it would be tough for the banks to tackle their bad debts.

Addressing the Thai-German Chamber of Commerce yesterday, Pansak Winyaratn, the chief policy adviser of Prime Minister Thaksin Shinawatra, said a fiscal stimulus in the IMF's or the Chuan government's style would not lead to the desired results, as judged by the government's failure to prop up the economy over the past three years.

"We listened to them but we have our way of doing things," he said. "We would not go to the Japanese institutions to borrow money from them and spend it to stimulate the economy like in the past."

Pansak said the Thai Rak Thai would instead focus its priorities on stimulating the farm sector as well as reinventing the small and medium-scale enterprises.

Together, they would form a new taxable base for the economy at a time when the government could not expect to collect tax from the corporate sector, at least over the next one to two years, he added.

He said the government did not have the luxury of extra money to spend on other modern sectors, which should try to help themselves.

Pansak's comments reflect a departure in Thailand from the conventional economic thinking. The Thai Rak Thai plans to go the other way to stimulate growth and create jobs through the farm sector and small and medium-scale enterprises. The conventional fiscal stimulus is to plough money into the infrastructure or housing projects to create demand.

BY WICHIT CHAITRONG and

THANONG KHANTHONG