B40bn to be spent on struggling economy
WICHIT CHANTANUSORNSIRI & CHATRUDEE THEPARAT
Vorapol: Room exists to raise spending |
Surapong: The aim is to help the poor |
Cabinet ministers will today review a new package of tax breaks and stimulus programmes worth as much as 40 billion baht as the government seeks to boost economic growth.
Sources said the growth programme would include cuts in excise taxes for biofuels, gasohol, diesel and petrol.
Bus fares for Bangkok residents will be subsidised to ease transport expenses for low-income earners. Residential electricity rates could also be reduced to help cut expenses.
The sources said the package would have a total value of 40 billion baht, and it aims to prop up economic growth hit hard by surging inflation, oil prices and weak consumer and investor sentiment due to the political uncertainties.
The excise tax on diesel, now 2.305 baht per litre, will be cut sharply, one government official said. Diesel pump prices are now at an all-time high of more than 45 baht per litre. Gasohol tariffs will also be cut to help reduce pump prices.
Global oil prices have soared in recent days due to weakness in the US dollar and economy along with supply concerns. Crude prices in the US eased yesterday to about US$143 (4,860 baht) per barrel, compared with a high of more than $147 on Friday.
Finance Minister Surapong Suebwonglee said the new package was aimed at easing living expenses, particularly for the poor.
He declined to offer details about the new measures, but confirmed that the tax for E85 gasohol would be cut to only 0.5 baht per litre, down from the present 2.57 baht. E85, containing 85% ethanol, is due to be introduced to the local market by the end of the year, complementing the currently available E10 and E20 fuels.
Mr Surapong ruled out calls for value-added or personal income tax reductions, noting the government already raised tax waivers to cover the first 150,000 baht in income under a previous stimulus package in March.
''These new measures are aimed at giving hope to the public by easing the burden of rising inflation and living expenses,'' Mr Surapong said.
Inflation is now running at a 10-year high of 8.9%, due largely to higher fuel and food prices.
Economic growth is expected to slow from the 6% posted in the first quarter due to weak investment and consumer spending. Concerns have been raised that Thailand could be headed for a bout of ''stagflation'', when rising inflation is combined with slow or declining economic growth.
Mr Surapong said policymakers were aware of the difficult environment and potential risks for the economy.
New stimulus measures were needed to help offset the impact of soaring oil prices, he said. It was previously estimated oil prices would not rise to $150 per barrel until the end of the year.
Ministers today are also expected to consider the government's proposed coupon programme, where the poorest households will be able to receive coupons that can be exchanged for basic foodstuffs and consumer products.
''The coupon programme for the poor will be one of the measures to be discussed,'' Mr Surapong confirmed.
Economists say the government has considerable room to increase spending to help boost the economy.
Vorapol Socatiyanurak, vice-chairman of the National Economic and Social Advisory Council, said that the new 2009 government budget calls for a deficit of only 2.4% of gross domestic product.
Sufficient room exists to raise spending without jeopardising long-term fiscal discipline or growth, he said. Public debt, now at about 38% of GDP, was well under the legal ceiling of 50%.
But Mr Vorapol said the government needed to ensure that monetary and fiscal policies were coordinated to best help the economy.
Most analysts agree that the Bank of Thailand will raise interest rates when it meets tomorrow to help curb inflation. A hike in short-term rates would be the first since mid-2007.
Mr Vorapol questioned whether raising interest rates represented the best means of addressing inflation that stemmed from an oil price shock, and that in any case, growth this year was certain to slow from previous targets.
''Forecasts of economic growth this year of 6% are impossible to reach. At the most, we may see 4.5%,'' he said. The economy grew 4.8% in 2007.
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