BANGKOK, Dec 13 – Thailand’s government should slow down its lavish populist projects to avoid the undesirable situation of rocketing public debt, the Bank of Thailand (BoT) has warned.
Songtum Pinto, BoT Monetary Policy Office director, said the populism policy, including the rice pledging scheme and the tax rebate for first-car buyers, takes up the state’s huge budget and its successive execution will greatly increase the government’s spending and public debt.
He urged the government to spend more on infrastructure development so as to strengthen Thailand’s declining competitive edge.
According to the World Competitiveness Yearbook 2012 published by the International Institute for Management Development (IMD), Thailand’s competitiveness is ranked 30th among 59 countries, a drop from 27th last year.
When Thailand becomes part of the ASEAN Economic Community in 2015, it will have to adjust its competitive strategy, otherwise it will be overtaken by neighbouring countries or be edged off the world stage, he warned.
Mr Songtum said the BoT has closely monitored the country’s rising household debt, particularly personal loans for those earning less than Bt15,000 a month.
Household debt will not be intense as long as salary earners are employed, while the skyrocketing stock index at 1,300 remains manageable and in accord with the strength and performances of listed companies, he said.
Housing loans have increased at a satisfactory pace but growth is too rapid in the condominium market, which has seen an increased rate of failures in debt payment.
Mr Songtum predicted Thailand’s economic growth at 5.7 per cent this year and 4.6 per cent next year thanks to domestic consumption but warned of challenges in light of slow economic improvement worldwide, especially the European debt crisis which will carry on for at least a decade and risk from the ‘fiscal cliff’ in the US.