By launching the emergency economic stimulus package which targets low-income people both in the city and upcountry, the government has sent out a clear message: "There is no need to worry about economic stagnation".
The government hopes the money it is injecting into the system via the package will help reinvigorate the economy and lead the country out of its critical condition.
The 136-billion-baht package, the brainchild of Deputy Prime Minister Somkid Jatusripitak, brings back the Village Fund programme in which one million baht will be channelled to each village across the country. Other measures include cheap loans to SMEs and a plan to accelerate disbursements for small investment projects, with the aim of generating income for local communities across the country. As a matter of principle, the money will reignite the growth engine, and will subsequently revitalise the economy. The second phase includes a special investment promotion package for investors.
But we have to admit these are just short-term measures which, at best, will be mere painkillers that ease the country's problems temporarily. The stimulus package may have some psychological effects as it creates a feel-good factor, and therefore restores people's hopes for a better economy.
Some are optimistic that the economy can still bounce back. The current stagnation is a mild malady compared to the 1997 tom yam koong crisis when the economic bubble burst, with the collapse of the real estate sector and non-performing loans in the financial sector.
But we cannot afford to be complacent. In fact, the government must tread with care in flirting with this cash-injecting scheme. The failure of this package will result in huge bad debts at the grassroots level and the country may plunge deeper into trouble.
Moreover, we must face the fact the country's bigger problem is the shrinking of the export market, by about 4.66%, in the first seven months. The contraction is partially caused by the troubled world economy. As a result, SMEs, especially those in the provinces, have experienced a difficult time while the high cost of living is a problem for the public at large.
We need to accept the fact the real challenge for Mr Somkid and his economic team is how to boost the country's competitiveness, and how to reduce logistics costs which account for 14% of the country's GDP. These two factors, if not solved, may mean that when the world economy improves, our economy may continue to flop as our products are no longer competitive in terms of both price and quality.
Eventually, Thailand may lose its status as an investment hub for international investors. This is the reason, according to Mr Somkid, that Samsung relocated its production base from Korat to Vietnam.
Competitiveness is a key factor in making our products cheaper, due to cost minimisation. And with the help of innovation, our products will be more attractive. That is the long-term advantage. It is unfortunate that over the past few years we have done little to improve the country's competitiveness in terms of infrastructure development, including the rail transport system.
After a long delay, due largely to prolonged political turmoil, we finally kicked off the 2015-2022 infrastructure plan, with an estimated budget of 3.38 trillion baht. The move just came too late.
When Mr Somkid gave a keynote speech on Thailand's economic direction last week, it's telling that he had to repeat the messages he gave when he was in power some 10 years ago. This included the need to boost competitiveness; the adoption of a domestic-driven model to lessen our dependence on the export and service sector, which takes up 77% of our GDP; the creation of an industrial cluster that will strengthen SMEs as our economic base; the branding of local products; the Village Fund; Otop development, and so on.
Mr Somkid received a warm welcome from investors and from those in the business sector. Such positive sentiment is significant for the restoration of investor confidence amid global economic turbulence, spurred by the China factor.
At the same time, Mr Somkid and his economic team have to deal with heavy expectations that his leadership will enable the country's economy to bounce back quickly. And the task ahead is truly demanding.
Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.