Post-coup uncertainty threatens Thai economy: finance minister

BANGKOK : Thailand’s finance minister says political uncertainty
following last September’s coup has become the biggest threat to the
economy, which could be heading towards its slowest growth in six
years.

In an interview with AFP, Finance Minister Chalongphob Sussangkarn
said the military-installed government hoped new stimulus measures
would boost the sluggish economy but cautioned against optimism in
post-coup Thailand.

“After the coup, people are waiting to see a clear signal as to
what the political situation will look like after the next election,”
Chalongphob said, referring to the December polls promised by the
ruling junta.

“But people are not sure about what’s going to happen and this is
really affecting our economy and political uncertainty is the biggest
threat to the economy,” said the former World Bank economist.

Amid falling public support for his government, Prime Minister
Surayud Chulanont, installed by the army after ousting business-savvy
premier Thaksin Shinawatra, announced in March the country would hold
elections in December.

But Thai voters are jittery as the Constitutional Court is set to
rule on vote fraud charges against the nation’s two biggest political
parties – Thaksin’s Thai Rak Thai party and the main opposition
Democrat Party – on May 30.

If found guilty, the parties would be dissolved and top officials
banned from politics for five years, meaning prominent leaders could
not run in the December polls.

“At the moment, things are very uncertain. There has been nothing
concrete yet to show that when we get to the next election in December,
things will be different from the situation before the coup,”
Chalongphob said.

The September coup capped months of street protests in Bangkok
demanding the ouster of premier Thaksin Shinawatra for alleged abuse of
power and corruption.

A weary public initially welcomed the coup with high hopes for a return to political normality.

But the military government has recently come under increasing
criticism over a number of policy miscues, including its poor economic
management and an escalating insurgency in the Muslim-majority south.

Hit by an uncertain political outlook, Thailand’s consumer
confidence dropped to a five-year low in February and the central bank
last month cut its growth forecast for 2007 to 3.8-4.8 percent from
4.0-5.0 percent earlier.

If the economy grew just 3.8 percent, it would mark the lowest rate since 2.2 percent in 2001.

To shore up the flagging economy, Chalongphob on Wednesday
announced a US$1.2 billion stimulus package that extends more loans to
farmers and low income earners in an effort to boost consumption.

“We need to inject a certain amount of money to turn the situation
around but it’s not going to go overboard. We tend to focus more on
what can be done this year because after the election in December, we
will be gone,” he said.

Chalongphob voiced hope that the package would help restore
business confidence hit by the government’s policy blunders, including
the central bank’s controversial capital controls aimed at halting the
Thai baht’s rise against the dollar.

Imposed in December, the capital rules required 30 percent of all
incoming investment to be held by financial institutions for up to one
year, causing a massive stock market sell-off.

Many exemptions have been made since the December debacle to water
down the currency rules but the general policy remains in place.

Chalongphob, appointed in March after his predecessor and former
central bank governor Pridiyathorn Devakula quit suddenly, had
previously come out against the draconian currency rules.

His appointment as finance minister had raised hopes in the
currency market that Thailand would scrap the 30 percent regulation but
Chalongphob defended his decision to keep the capital controls.

“When I became the finance minister, I knew there were speculators
speculating on my ordering the Bank of Thailand to change the policy,”
he said.

“If that happened, the baht would strengthen very rapidly and I did not want to create a shock in the market,” Chalongphob said.

But despite the capital controls, the baht has continued to rise
against the dollar, trading at nine-year highs in the 34.00-35.00
range.

With the local currency soaring, business leaders have called on
the government to implement protective measures for exports, the
backbone of the economy, as the strong baht makes Thai exports less
competitive abroad.

But Chalongphob said not only exports but the economy overall faced pressure due to a lack of political clarity.

“Right now, there is too much confusion. People are waiting for a
clear picture as they cannot predict what will happen” in Thai
politics, he said.

– AFP/de

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