Annual growth of 2-3% foreseen

       Thailand is expected to post modest annual growth of 2% to 3% over the next several years, according to former finance minister Thanong Bidaya.
       Dr Thanong, who served briefly as finance minister during the 1997 economic crisis and again during the Thaksin Shinawatra government, cautioned that low growth rates would put pressure on the government to raise adequate revenues for investment and debt repayment.
       "Thailand will face the risk of rising liabilities over the next three years, with public debt likely to hit an all-time high of as much as 60% of gross domestic product due to larger budget deficits and other negative factors that are dampening economic growth," he said.
       "The Thai economy is likely to return to positive annual growth in 2010, with growth averaging 2% to 3% per year over the next several years. But this marginal growth will not generate enough funds to support investment and debt repayments."
       Dr Thanong, speaking at an economics conference hosted by the National Economic and Social Development Board,said the economy needs to see consistent annual growth rates of about 4% to 6%over the next few years to ensure the government can repay its debts.
       The Thai economy contracted by 4.9%year-on-year in the second quarter, compared with a 7.1% year-on-year decline in the first quarter. For the first half, the Thai economy shrank by 6% compared with the same period last year.
       But the economy posted 2.3% growth from April to June, compared with a 1.8% contraction quarter-on-quarter for the first three months and a 5.9% decline in the fourth quarter of 2008.
       The NESDB estimates the Thai economy will this year contract by 3% to 3.5% compared with 2008.
       The Finance Ministry currently projects annual economic growth of 2.5%for 2010, rising to 4.5% to 5% in 2012 thanks to added infrastructure investments under the "Thailand: Investing from Strength to Strength" programme.The Public Debt Management Office, a unit of the ministry, expects public debt to peak at 57% of GDP in 2013 before falling steadily through the rest of the decade, with the annual budget returning to a balanced position by 2015.
       But Dr Thanong said the government has yet to come up with a clear plan on how to repay debts over the period when the world economy might not recover as expected.
       "Economists have different perspectives over the world's economy, with some predicting the global economy has bottomed out and started recovering while many argue the economy remains fragile," he said."In my personal view,the real economic recovery relies mainly on private investment and public consumption, and from what we've seen the two indicators have yet to recover."
       The government's previous fiscal stimulus package mainly focused on stimulating short-term spending, not on supporting the real sector. The second spending plan would go mainly to infrastructure investment, he said.
       The second stimulus package was unlikely to be disbursed within three years as planned, due to red tape and complicated investment regulations, he said.
       He said the government should help the real sector reduce costs, increase competitiveness and facilitate investment, as well as help restore tourism,to boost the economy in the short term.
       The government is also being urged to set up an independent body, the financial services authority, to control the financial-service industry and manage financial liquidity for local industries.