Thailand’s finance minister has promised a dramatic surge in spending as political turmoil sends shockwaves in the economy.
Suchart Thada-Thamrongvej said in an interview: “We need to expand fiscal policies in the coming year to help the poor and create many new jobs.”
As Emerging Markets was going to press, the country’s prime minister, Somchai Wongsawat, said he was considering whether to resign, following anti-government protests that left two people dead and 478 injured on Tuesday.
The protesters argue the government is a proxy for ex-premier Thaksin Shinawatra who was ousted in a military coup in September 2006 following similar protests.
The instability has eroded consumer confidence, which reached a 10-month low of 69.6, against a 100 target, in early September.
This year’s fiscal deficit is 2.8%, while Thailand’s debt-to-GDP ratio stands at 36%. Suchart argued this left plenty of room for greater government spending. “We want a lot more employment, so in next year’s budget a deficit of more or less 4% may not be too bad.”
To make up for declining consumption, investment and exports, Suchart vowed to prime the fiscal pump to expand state healthcare, build public housing, capitalize village funds, and launch large infrastructure projects.
But he argued that this was not simply a fiscal stimulus stop-gap measure, but that the need to develop rural areas required the government to spend more than administrations previously have.
The country is bitterly divided between supporters of the populist government, which draws its support from the rural poor, and royalists and the military, that are backed by urban dwellers mainly in Bangkok. Last week, the army has said it would not seek to topple the government.
Nevertheless, Suchart feared that “there could be a military coup”, and urged protesters, and the army, to remember the administration’s elected mandate. “It is up to the people to decide what is best for Thailand” and argued “they are supporting us in rural areas. It is just a problem in the downtown [Bangkok]”.
Economic policy has become a proxy in this battle, amid resentment over the gap between the urban elite and rural poor. The military sharply rolled back rural development programmes started by Thaksin, claiming these measures were an unsustainable form of patronage. “These are people opportunity policies”, he argued. “People should separate economic issues from political issues.”
Suchart expects the economy to grow by 5% this year, up from 4.8% in 2007. But he argues the political chaos will not derail investment, since “we have been up and down with this political crisis almost every other year so people know that if you are in Thailand you don’t fear of this crisis.”