Framework for Thailand’s Economic Stability in 2013

(29/05/2013)

The Cabinet, during its meeting on 28 May 2013, approved a framework for maintaining Thailand’s economic stability in 2013 to deal effectively with financial risks, as a result of the appreciation of the baht.

The Office of the National Economic and Social Development Board and the Ministry of Finance reported to the Cabinet that the Thai economy was facing risks from slow recovery in the global economy and quantitative easing measures implemented by several major countries, such as the United States, Japan, and the United Kingdom.

These measures, as well as currency wars, have resulted in capital inflow to the Asian region, and the value of the baht has become stronger than that of other currencies in this region. The appreciation of the baht has affected Thai exports and services. This situation is likely to delay the Government’s disbursements for investment in mega-projects. Another negative factor is a risk of a new round of the global economic crisis.

In order to stabilize the Thai economy and sustain growth, the Office of the National Economic and Social Development Board and the Ministry of Finance came up with the framework for Thailand’s economic stability in 2013.

Concerning immediate measures, the framework seeks to ensure that the baht will not be too strong to affect the potential of the Thai economy. At the same time, it seeks to create sustained economic growth of 5 percent. Income generation will be promoted through exports, tourism, and overseas investment. Economic and tax structures will be adjusted to enhance Thailand’s competitiveness and promote sustainable growth.

Regarding monetary measures, the Bank of Thailand will be encouraged to ensure that the policy rate is in line with the economic situation and macro prudential measures will be implemented. Assistance will be provided for small and medium-sized enterprises (SMEs) in order to ease impacts from the appreciation of the baht.

As for fiscal measures, relevant agencies were told to ensure that investments of state enterprises would be in line with the set target. The private sector will be urged to invest more in foreign countries. The tax structure will be reformed and SMEs will be provided with guarantees to protect them from the volatility of the baht.

The framework for Thailand’s economic stability also consists of specific measures to support production and services, exports, investment, and people’s income. For instance, farmers’ income will be upgraded. The proportion of SMEs will be increased to 40 percent of GDP. Large industries will be urged to expand investment and develop technology.

Concerning tourism, efforts will be made to increase international tourist arrivals to 24.7 million in 2013 and the country’s tourism revenue will be doubled by 2015. In addition to achieving the 2013 export growth target at 9 percent, other measures also call for energy security with reasonable prices and cost reduction for low-income earners.