Bridging gaps crucial for Thailand
After a year of economic and political turmoil, Thailand is at last starting to look up and growth and economic prospects are turning positive, according to finance minister Korn Chatikavanij. He claims the government has started major reforms to improve the lot of poor Thai farmers who are likely to prove radically important politically and economically.
Growth next year will be positive again, he predicted, at about 3.5 per cent - much better than the minus 2.7 per cent forecast for this year, but well below the country's potential of more than 5 per cent. 'The prognosis is good,' said Korn. 'But long term, we should be doing a lot better - closer to a 5 per cent steady rate.'
The World Bank in its quarterly report agreed with Korn's assessment that the economy had recovered 'from a rocky first half', but cautioned that Thailand was not 'out of the woods yet. It will take at least another two to three years for Thailand to return to its potential growth'.
Early in the year, the economy seemed to be heading off a steep cliff, with predictions that growth might plummet 5 to 7 per cent on a mixture of financial, economic and political factors, backlash from the global credit crunch and recession as well as domestic political turmoil.
'When Prime Minister Abhisit [Vejjajiva] was voted in parliament to the office [in December 2008], we were in the middle of the biggest financial and economic crises for over a decade,' said Korn.
Today, he permits himself a smile of satisfaction in the achievements: 'The manufacturers' confidence index is over the 100 level for the first time in 42 months. Consumer confidence is up. We are back to capacity utilisation of 60-plus per cent, up from the low earlier this year of about 50 per cent. As to unemployment, there was fear that it would hit the one million mark. In normal times, it is about 300,000 to 350,000. It peaked at about 750,000 in about May. It is now down to below 500,000.'
In many ways, Thailand should be the most promising of all Asian countries aspiring to be the next economic tigers. The pleasant tropical climate helps feed a good array of crops and a tourist industry. It has the start of a promising industrial base and is the world's second-biggest maker of pick-up trucks after the US.
However, it is a split society between rich and poor, between cosmopolitan Bangkok and rural areas. The divisive political dimensions of this were exacerbated by the rule and ousting of controversial prime minister Thaksin Shinawatra, who continues to exert a powerful influence even though he is in exile and in flight from a two-year prison sentence after being found guilty in absentia in a conflict of interest case.
Korn argues the government has made impressive strides to bridge some of the gaps and boost rural prospects. One law allowed the government to borrow an extra 800 billion baht (HK$186.16 billion) to kick-start the economy.
'We have successfully implanted some grassroots reform policies that have led to higher levels of income for farmers,' he said, adding that an income guarantee scheme was benefiting four million registered farmers.
Korn was headed northeast, to promote the new policies. If he and Abhisit can succeed, they may sow the seeds not just for more votes but to build the social and economic bridges needed to reach the country's economic potential.
Rocky first half
Thailand borrowed an extra 800 billion baht to revive the economy
Growth is forecast at minus 2.7 per cent this year but may swing next year to: 3.5%