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Economic outlook bright in 2010, but stimulus package is still indispensable

According to International Monetary Fund (IMF)’s figures, the Asian recovery started in February this year, six months ahead of the US recovery. Bank of Thailand governor Tarisa Wattanaket yesterday also indicated that the Thai economy had bottomed out in the second quarter. Most of the policy responses to the crisis are directed to the short-term need to shore up the economy in the face of the economic contraction. Fiscal injections are expected to generate greater domestic consumption that will ease the pain of domestic producers and consumers. Not much attention has been paid to how to make the fiscal injections sustainable. Even less thought has been given to what might a new “rebalanced growth path” for the country look like and how it can be achieved.

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According to International Monetary Fund (IMF)’s figures, the Asian recovery started in February this year, six months ahead of the US recovery. Bank of Thailand governor Tarisa Wattanaket yesterday also indicated that the Thai economy had bottomed out in the second quarter. Most of the policy responses to the crisis are directed to the short-term need to shore up the economy in the face of the economic contraction. Fiscal injections are expected to generate greater domestic consumption that will ease the pain of domestic producers and consumers. Not much attention has been paid to how to make the fiscal injections sustainable. Even less thought has been given to what might a new “rebalanced growth path” for the country look like and how it can be achieved.

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However, Prasert told the FTI seminar, moderated by Suthichai Yoon, Nation Multimedia Group’s editor-in-chief, that the government’s massive stimulus package is still indispensable if private consumption and investment are going to improve next year.

Stimulus package is still indispensable

Stimulus package is still indispensable

Between 2009-11, the Abhisit government has committed to invest a combined Bt1.43 trillion to boost the economy in the wake of the global economic crisis, which broke out in September 2008 following the collapse of US investment bank Lehman Brothers.

via Economic outlook bright in 2010, but…

Obviously, the growth prospect of Thai economy depends on the prospect of growth and trade at the global and regional level. While there are signs every now and then that the western economies may begin to bottom out in the not too distant future, over optimism about this would be rash. Like in the case of the 1997 crisis, even if the economy bottoms out, this does not mean that the problems are over.

Thailand bottomed out after about five to six quarters from the start of the 1997 crisis, but it took five years before output got back to the pre-crisis level (see Figure 1). The decline in non performing loans ratio to below the level of 10 percent took even longer; about eight years. Thus, in the case of the sub-prime crisis, a quick return to business as usual appears to be out of the question.

Most of the policy responses to the crisis are directed to the short-term need to shore up the economy in the face of the economic contraction. Fiscal injections are expected to generate greater domestic consumption that will ease the pain of domestic producers and consumers. Not much attention has been paid to how to make the fiscal injections sustainable. Even less thought has been given to what might a new “rebalanced growth path” for the country look like and how it can be achieved.

Policy makers seem to hope that the current crisis will be short and that fiscal injections can provide a temporary relief before everything goes back to normal. As indicated earlier, this is likely to be wishful thinking.

Even if the US and other western economies hit bottom this year, it may take a while before full recovery is achieved. And it is unlikely that full recovery will mean that East Asian export can play as big a role in East Asian economies as it did before the crisis. Thus, some fundamental restructuring of Thailand’s economy, as well as those of other East Asian countries, to a new growth path which is less dependent on exports will be necessary. This will certainly not be easy and cannot be achieved in the short term.

Economics

The Future of Asia: greener but with a public and private debt hangover

The COVID-19 pandemic has been a perfect storm, destroying jobs, worsening poverty and inequality, and creating a public and private debt problem—especially for countries and firms already in fragile financial health beforehand

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The Sydney Opera resumed live performances and the city of Melbourne recently hosted the Australian Open tennis tournament with fans (mostly) in attendance.

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50:50 campaign may not get immediate extension

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BANGKOK (NNT) – The government’s 50:50 co-pay campaign expiring on 31st March may not be getting an immediate campaign extension. The Minister of Finance says campaign evaluation is needed to improve future campaigns.

The Minister of Finance Arkhom Termpittayapaisith today announced the government may not be able to reach a conclusion on the extension of the 50:50 co-pay campaign in time for the current 31st March campaign end date, as evaluations are needed to better improve the campaign.

Originally introduced last year, the 50:50 campaign is a financial aid campaign for people impacted by the COVID-19 pandemic, in which the government subsidizes up to half the price of purchases at participating stores, with a daily cap on the subsidy amount of 150 baht, and a 3,500 baht per person subsidy limit over the entire campaign.

The campaign has already been extended once, with the current end date set for 31st March.

The Finance Minister said that payout campaigns for the general public are still valid in this period, allowing time for the 50:50 campaign to be assessed, and to address reports of fraud at some participating stores.

The Fiscal Police Office Director General and the Ministry of Finance Spokesperson Kulaya Tantitemit, said today that a bigger quota could be offered in Phase 3 of the 50:50 campaign beyond the 15 million people enrolled in the first two phases, while existing participants will need to confirm their identity if they want to participate in Phase 3, without the need to fill out the registration form.

Mrs Kulaya said the campaign will still be funded by emergency loan credit allocated for pandemic compensation, which still has about 200 billion baht available as of today.

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Customs Department Considers Measures to Help SMEs

National News Bureau of Thailand

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BANGKOK (NNT) – The Customs Department is seeking ways to reduce the impact of the exemption on import tax and value-added tax (VAT) for imported goods worth up to 1,500 baht, as such measures are hurting small and medium-sized enterprises (SMEs).

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