Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong has reassured the government the economy is on the right course by stimulating domestic consumption to balance declining exports despite his critics pushing for sustainability and prudence.
The government pursued several of its election pledges in the year after assuming office _ a 300-baht daily minimum wage, 15,000-baht salaries for university-graduate civil servants, paddy pledging at 15,000 baht a tonne and debt suspension of 280 billion baht for 2.5 million farmers and small debtors.
Mr Kittiratt said during his one-year assessment he feels these policies have led to the growth of the domestic economy.
The corporate tax was also cut to 23% this year and will drop to 20% next year. The government's tax incentive for first-time car buyers is expected to be used by 169,000 car buyers causing 12 billion baht worth of tax losses. The ministry approved 844,000 credit cards for farmers with 621 million baht being charged.
The government's emergency decree to borrow 350 billion baht for construction of flood prevention structures must be drawn down by the middle of next year, and he believes it will save budgetary space. This move would allow the ministry to embark on a plan to reduce the budget deficit, with the deficit in fiscal year 2013 rising by 20 billion baht from 2.4 trillion in 2012, he said.
But Korn Chatikavanij, a former finance minister from the Democrat Party, warned that only a small handful of large businesses will benefit from the government's corporate tax reduction, with the majority of small businesses receiving no help.
He said Mr Kittiratt should have introduced a solid framework to compensate for the corporate revenue tax losses and the fiscal liabilities of the Bank for Agriculture and Agricultural Cooperatives paddy-pledging scheme. Losses from pledging are estimated at 100 billion baht.
While Mr Kittiratt said the government was successful in reducing fiscal liabilities by using funds from the Deposit Protection Agency to pay for the interest burden of financial bailout fund from 1997 economic crisis, Mr Korn said the move undermined the country's deposit insurance system.
Sompop Manarungsan, an economist, said many government policies will make only a short-term impact in strengthening the domestic economy. Much of this year's growth has come from higher auto sales due to tax incentives and rehabilitation after the flood.
Thanavat Polvichai, the vice-president for research at the University of the Thai Chamber of Commerce, said while government policies aimed at stimulating the economy are sound in theory, they have not proven they can drive growth after a year.