Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong has reassured the government the economy is on the right course by stimulating domestic consumption to balance declining exports despite his critics pushing for sustainability and prudence.
The government pursued many of its election pledges in after assuming office _ a 300-baht daily minimum wage, 15, 000-baht salaries for university-graduate civil servants, paddy pledging at 15, 000 baht a tonne and debt suspension of 280 billion baht for 2. 5 million farmers and small debtors.
Mr Kittiratt said during his one-year assessment he feels these policies have generated the expansion in the domestic economy.
The corporate tax was also cut to 23% this coming year and can drop to 20% next year. The governments tax incentive for first-time car buyers is expected to be taken by 169, 000 car buyers causing 12 billion baht worth of tax losses. The ministry approved 844, 000 charge cards for farmers with 621 million baht being charged.
The governments emergency decree to borrow 350 billion baht for construction of flood prevention structures must be drawn down by the middle of next year, as well as believes it will save budgetary space. This move would allow the ministry to start an idea to lessen this deficit, with the deficit in fiscal year 2013 rising by 20 billion baht from second . 4 trillion this year, he said.
But Korn Chatikavanij, an ex finance minister from the Democrat Party, warned that just a little handful of large businesses will enjoy the governments corporate tax reduction, with all the many smaller businesses receiving no help.
He said Mr Kittiratt needs to have introduced a great framework to compensate for that corporate revenue tax losses and also the fiscal liabilities in the Bank for Agriculture and Agricultural Cooperatives paddy-pledging scheme. Losses from pledging are estimated at 100 billion baht.
While Mr Kittiratt said the us government was successful in reducing fiscal liabilities by utilizing funds from the Deposit Protection Agency to pay for the interest burden of financial bailout fund from 1997 recession, Mr Korn said the move undermined the countrys deposit insurance system.
Sompop Manarungsan, an economist, said many government policies will make merely a short-term impact in strengthening the domestic economy. Much of this years growth comes from higher auto sales as a result of tax incentives and rehabilitation after the flood.
Thanavat Polvichai, the vice-president for research in the University of the Thai Chamber of Commerce, said while government policies targeted at stimulating the economy are sound theoretically, they have got not proven they could drive growth after a year.