The economy is likely to slow down in the second half of this year as the government's massive infrastructure investment is expected to start in the next fiscal year, says outgoing Bank of Thailand chairman Virabongsa Ramangkura.
The 2-trillion-baht projects are expected to boost the economy amid the ebbing momentum of domestic consumption,
Mr Virabongsa urged the government to accelerate the passage of the megaprojects' borrowing bill and public hearings on the 350-billion-baht water management projects.
The government's existing policies will not produce fruitful results in terms of spurring economic growth because stimulus measures such as the first-time car buyer scheme ended last year, he said.
It is expected that the government will start drawing down the first lot of the 2-trillion-baht loans to fund infrastructure projects in fiscal 2014 starting Oct 1.
The hefty borrowing bill, however, needs time-consuming parliamentary deliberation, while the Democrat Party plans to impeach the cabinet over the water projects, citing the government's negligence in conducting public hearings and assessing environmental and health impacts.
Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong recently said there is no need for any short-term stimulus because the government hopes that infrastructure projects including high-speed trains will bolster economic conditions in the latter half.
In the meantime, Mr Virabongsa said the central bank's committee on financial loss assessment has mitigated losses from 800 billion to 600 billion baht thanks to the US dollar's strength.
As the dollar continues to appreciate, this helps weaken the baht and prevents the central bank from incurring heavy losses. The baht has weakened to about 31 baht to the dollar after rising to a worrisome rate of 28.55, its highest level in 16 years, in mid-April.
Even so, the improved figure is inadequate and the committee has to continue improving its financial deficit account, Mr Virabongsa said.
Siri Ganjarerndee, a member of the central bank's Monetary Policy Committee, said Mr Virabongsa has discussed the possibility of distributing greater power to the management board of the central bank's international reserves fund to make decisions and improve management efficiency.
The issue needs further extensive study by the committee to examine whether the move will produce fruitful outcomes.
He said the committee will also evaluate whether the central bank should use its international reserves fund to invest in equities with the aim of higher investment returns.
Thailand's foreign reserves, which amounted to US$171 billion and a net forward position of $23.8 billion as of July 12, are invested in government bonds, gold and deposits at the International Monetary Fund.
The central bank's board recently allowed investment of its foreign reserves in US state bonds.
About the author
- Writer: Pathom Sangwongwanich
Position: Business Reporter