If Thailand’s increasing economic troubles are to continue, would this again spark another economic crisis in Southeast Asia, remembering the contagion that resulted from the collapse of the Thai baht in 1997?
On 3 June 2006, at the “Thai Strategies in the Global Trend” seminar organised by Triam Udom Suksa School, leading economists warned yesterday that Thailand could face a new round of economic problems such as the 'downturn like 1997'. ''We are worried that if Thailand can't cope with this economic situation in time, the country could run into a new round of economic crisis,'' Virabongsa Ramangura, former finance minister and deputy prime minister said, pointing to Thailand’s increasing difficulties in coping with competition from India, Russia and China.
Such forecasts are worrying because Thailand’s competitiveness is the strongest amongst Southeast Asian countries outside Singapore.
Various solutions have been proposed by Thai economists to avert a 1997-style meltdown. Some called for austerity programmes to encourage Thais to economise and stop spending lavishly while others recommended opposite measures for government to promote domestic consumption to make the economy less dependent on exports. Caution was also expressed by Supachai Panitchpakdi secretary-general of the UN Conference on Trade and Development (Unctad), and former head of the WTO on Thai’s government’s FTA policy. He expressed concern that the government's FTA policy could put the country at a disadvantage if the agreements were not carefully studied beforehand.
While economists have their thinking, so does the politicians in power, especially a politician whom many say is making a shadowy comeback.
Amidst the economic doom and gloom, is the unfurling story of Thaksin’s return to power. As the Nation reported, caretaker Prime Minister Thaksin, has come up with “a mixed bag of measures to jump-start the economy and preserve his political popularity, particularly among the poor”. However, economists expressed doubts over the impact of these initiatives in the face of rising oil prices, rising cost of living and high interest rates environment.
But Thaksin is ready to look into pump-priming the economy again through public sector spending, raising minimum wage and appealing to the farmers by instructing the Bank for Agriculture and Agricultural Cooperatives to cut its loan interest rate by 1 percentage point for farmers with debts under Bt100,000. Whether all these measures will endear him to the voters and help turn the economy remains to be seen.
Economists see hard times ahead (Bangkok Post, 4 June 2006)
Thaksin looks to shore up support (The Nation, 4 June 2006)