Thailand's economic recovery should gain momentum from September following a one-year downward correction resulting from the previous government's distorted stimulus policies, says Deputy Prime Minister MR Pridiyathorn Devakula.
He said the present government had focused on good governance in terms of administrative and economic policies by reducing market distortions and minimising liquidity generated from grey-area businesses. Therefore, the economy slowed down for a year to adjust its base, and growth is expected to regain its normal expansion rate subsequently.
"Economic growth must be sustainable, unlike in the past, when the first-time car buyer scheme induced growth for only one-and-a-half years and it [the growth ratio] dropped afterwards," MR Pridiyathorn told a seminar entitled "Re-energising Growth through Better Governance" hosted by the Thai Institute of Directors yesterday.
He said the previous administration had not practised good governance. Losses from the costly rice-pledging scheme are estimated at 600 billion baht and have distorted the rice price structure. The tax rebate scheme for first-time car buyers altered the production structure, as it was considered a short-term economic stimulus that could cause structural damage in the long run.
"We must ensure righteousness, or else things will be bad. The private sector should refrain from just benefiting itself," he said. "Everyone should focus on sustainable growth and adhere to good governance."
The National Economic and Social Development Board said the economy in the first quarter expanded by 3% year-on-year and 0.3% quarter-on-quarter on a seasonally adjusted basis, with growth supported by continued recovery in private consumption, accelerated public investment and a rebound in tourism.
The economy is expected to expand by 3-4% this year and next, driven mainly by public expenditure and tourism, while the low public debt ratio provides room for government spending as a means of boosting economic growth in the next two or three years, MR Pridiyathorn said.
He said the government planned to accelerate budget disbursement for fiscal 2016 starting Oct 1, and public expenditure should lead to a crowding-in effect, with the private sector participating in investment.
MR Pridiyathorn reiterated government spending had not been sluggish, as budget disbursement by the ministries under his supervision — Finance, Energy and Industry — had exceeded their targets.
If exports can surpass 10% growth like in the past, then economic of 4-5% could be expected, he said.
But the global economic slowdown and lower demand from Thailand's trading partners have dragged down Thai exports, and this year's export growth outlook must be reconsidered in the coming three months, he said.
The weakening baht could help to shore up export recovery momentum by increasing export value, MR Pridiyathorn said.
The Commerce Ministry reported the value of exports, which account for 60-70% of GDP, fell for the fourth month running in April, down by 1.7% year-on-year, while the four-month figure was down 3.99% year-on-year.
The Bank of Thailand is scheduled to announce a downwardly revised forecast for 2015 economic growth today following the worse-than-expected export performance.
The central bank's current economic growth projection is 3.8%, cut from 4% forecast previously.
Regarding candidates vying for the top post at the Bank of Thailand, MR Pridiyathorn said he would not get involved in the selection process, as Finance Minister Sommai Phasee was in charge of that decision.
But regardless of whether the new governor is an internal or external candidate, that person should emphasise foreign exchange management similar to incumbent governor Prasarn Trairatvorakul, he said.
A highly placed government source said two of the five candidates had been shortlisted by the selection committee — Veerathai Santiprabhob, a member of the Bank of Thailand's board and Monetary Policy Committee, and Supavud Saicheua, managing director of Phatra Securities and a former finance minister adviser.
In the meantime, Bangkok Bank executive chairman Kosit Panpiemras said BBL was maintaining its current 2015 economic growth forecast at 3%.
State spending and state investment are the major pillars for the economic growth this year, while export prospects remain dismal amid the uneven global recovery, he said.