The government's recently announced economic stimulus measures are expected to cut downside risks to Thailand's growth this year and help to drive next year's growth to 4.8%, says the Bank of Thailand.
Bank of Thailand governor Prasarn Trairatvorakul addresses the SCB EIC seminar in Bangkok yesterday.
But central bank governor Prasarn Trairatvorakul cautioned the effects of the measures would probably emerge only next year, as the disbursement amount for the rest of this year was small.
He was speaking at a seminar in Bangkok hosted by Siam Commercial Bank's Economic Intelligence Center (SCB EIC).
The government on Wednesday approved a 364.5-billion-baht stimulus package including expediting 129 billion baht in disbursements from the fiscal 2015 investment budget, taking leftover funds from the Thai Khem Khaeng project to spend on repair work under the Education and Public Health ministries as well as on irrigation projects, and a cash handout of up to 15,000 baht per rice farming household.
The measures are aimed at boosting growth in the fourth quarter for a full-year figure of 2%.
The package has received a favourable response, as the measures reduce risks associated with the government's budget disbursement since they ensure public spending is just one of the essential factors driving the economy.
Although the government can theoretically disburse its fiscal budget at 91.7%, the rate is usually lower, so any move to increase the disbursement rate will help to reduce downside risks to the economy, Mr Prasarn said.
"This is a sign of the government's intention of stimulating the economy, and it's hoped this will build up private-sector confidence," he said.
"If the private sector follows suit in terms of spending and investment, this will help to support the positive momentum."
Private spending and investment typically accounts for a higher proportion than public spending.
The central bank recently slashed its economic growth forecast for next year to 4.8% from 5.5% due to potentially lower-than-expected domestic consumption, private investment and exports.
Public spending is expected to be the main driving force in boosting the economic momentum.
The measures do not distort market forces, while the implementation process will be short term, Mr Prasarn said.
Regarding the decision by the military-appointed State Enterprises Policy Commission to allow the central bank to supervise specialised financial institutions, he said plans were still being prepared, and clearer plans would be discussed with the Finance Ministry.
Sutapa Amornvivat, an executive vice-president of SCB and chief economist at the SCB EIC, said the economic stimulus measures were expected to support the economy in the short term, as they were not conducive to debt accumulation and did not distort market forces.
A "multiplier effect" is expected to occur to some degree since the measures are aimed at stimulating economic activity at the grass-roots level, she said.
Ms Sutapa has proposed three strategies to for sustainable growth in the country.
They are pushing the country towards greater innovation in the supply chain, exploring new markets and adjusting to match the country's changing demographics.
Education and labour development are necessary to reach annual economic growth of 5% in the long run, she
said, adding that otherwise annual
growth would average about 3% from 2014-20.
In addition, Ms Sutapa urged local business operators to adjust their strategies to cope with the country's ageing society.
At the same time, Generation Y consumers, born from 1981-2000 and representing 28% of Thailand's population, will be a major new market, she added.