About 75 per cent of the Bt2,000 “Help the country” cheques was spent immediately, with lower income recipients tending to save less than higher income earners, according to an opinion poll released yesterday.
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Few pause in cashing and spending their Govt cheques
Thailand is among the region’s more open economies, with exports accounting for around 65% of gross domestic product (GDP)
Concerns are already rising that big foreign manufacturers, faced with financial problems in their home countries and declining regional demand for their products, could permanently shutter their Thailand-based facilities. Those worries intensified earlier this month when Japanese automotive and motorcycle producer Suzuki announced plans to close its Thailand operations. Ailing US auto giant General Motors’ local affiliate also raised eyebrows when it requested and was declined a 3 billion baht loan from Thailand’s Ministry of Industry for a diesel engine project.
New Prime Minister Abhisit Vejjajiva’s government has responded to the crisis with vigorous fiscal pump priming
Those outlays are added to the stimulus measures written into the 2009 fiscal budget, which was devised to run a 2.5% of GDP deficit. The government has also implemented 40 billion baht worth of tax cuts mainly for the property sector and indicated it could launch another supplementary budget before the end of the fiscal year in September if the global economy slips further than expected.The Bank of Thailand meanwhile has supported those measures with rapid monetary easing. Since December the central bank has trimmed 175 basis points off the benchmark interest rate, bringing down the 14 day bond repurchase rate to 2%. Economic analysts believe central bank authorities will slash rates further to around 1% before the end of the year. The local currency, the baht, has reacted mildly to the cuts fluctuating between 34 and 35 to the US dollar.
Few pause in cashing and spending their Govt cheques
It represents one of few times in recent years that fiscal and monetary policies have been complementarily calibrated. A grinding political conflict, pitting supporters and detractors of former Prime Minister Thaksin Shinawatra who was ousted in a 2006 military coup, has hobbled successive governments’ ability to devise and implement effective economic policies.
The debilitating conflict climaxed last November when military-linked anti-government protestors closed Bangkok’s two international airports for over a week, crippling the money-spinning tourism and air freight dependent export sectors. The Bank of Thailand has estimated the closure cost the Thai economy as much as 290 billion baht, with hotels estimated to have lost 140 billion baht due to cancellations.
Electronics and electrical components account for nearly 35% of total exports.While official unemployment figures were still low at 1.5% as of December, they are expected to climb potentially twice as high in the months ahead as cash-strapped employers opt to save costs by cutting staff rather than reducing worker hours. Whether rising unemployment will translate into significant new rounds of social unrest and political disruption is unclear.
