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ECONOMY, INFLATION AND CONSUMER ASSISTANCE
Tamed inflation comes at cost of fiscal deficit
POST REPORTERS
While some view free bus rides are confusing and unfair to some operators, others say they will help add money, no matter how little, to people's pockets. |
Economists and business leaders yesterday offered mixed reactions to the government's 47-billion-baht assistance package.
The programme is aimed at helping ease financial pressure on the public from soaring fuel and living expenses, and includes free bus rides for Bangkok residents, tax cuts on diesel and gasohol, and waivers on water and electricity charges for small households.
Finance Minister Surapong Suebwonglee said the six-month package would increase economic growth by 0.3 to 0.5 percentage points and help the country reach its growth target of 5.5% to 6% this year.
But analysts question whether the programme would have a genuine impact considering that oil prices continue to rise and there seems little signs that political problems would ease soon.
Korn Chatikavanij, the deputy secretary-general of the opposition Democrat Party, criticised the measures as a populist programme that represented "the last playing card" of the embattled government.
While the public would benefit somewhat from the measures, the policies failed to address the underlying problems faced by the economy, he said.
"I think these measures are just a waste. For instance, the cuts on diesel fuel taxes. There are many who are not suffering from diesel prices who will benefit. In fact, the measure may only encourage people to use more fuel, rather than take steps to conserve energy," Mr Korn said.
The free bus rides for Bangkok residents were equally ill-designed, he said, as free trips would not automatically apply to all buses, but only selected ones, resulting in confusion among commuters and unfair treatment for private operators.
Kanit Sangsubhan, the director of the Fiscal Policy Office's Policy Research Institute, said he believed the policies outlined yesterday would help ease some financial pressure on the public.
"Still, I don't see how 6% growth this year is possible. We are more likely to see 5.5% growth," he added.
But Tom Paiboon Nalinthrangkurn, a managing director at Tisco Securities, said the focus of the government to address the problems of inflation was a welcome one.
"Whether it is by way of tax measures, transfers to the poor using populist policies or raising interest rates, the direction is correct. But it's hard to say what the impact will be for now," he said.
The Kasikorn Research Institute yesterday estimated that the package should help cut inflation to an average of 7.3% this year from an earlier forecast of 7.8%.
"The relief on inflation, however, is a tradeoff with the fiscal deficit, which could rise to 220 billion baht this year from earlier forecasts of 172 billion," the institute said in a research note.
But while the programme should help increase household income, business leaders are not hopeful that this will translate into added spending.
Likit Fahpyochon, a former president of Thai Retailers' Association and an executive of the Central Retail Corporation, said the package would have little impact on the retail market.
"Even though low-income earners will have more money in their pockets, they won't spend because they are not sure whether the government will help them more in the future. The measures will last only for six months," he said.
Mr Likit noted that many poor residents residing in flats may not even qualify for the free water and electricity, as their bills were paid to the flat owners rather than directly to the public utilities.
Santi Vilassakdanont, the chairman of the Federation of Thai Industries, said while the package had both pros and cons, "doing something was better than doing nothing".
Cutting diesel prices by a few baht per litre would have little benefit so long as global oil prices continued to rise, he said. "But at least people will have some more money to spend on other basic necessities."
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