Accessibility links

Economy Buoys Thai Prime Minister's Election Prospects


Continuing economic growth has boosted Prime Minister Thaksin Shinawatra's prospects in Thailand's coming general election. But some people are worried about the long-term effects of his government's populist policies.

Thailand's Prime Minister Thaksin Shinawatra, his popularity on the rise ahead of Sunday's general election, has overseen sound economic recovery since taking office in 2001.

He inherited an economy that had been battered in the Asian financial crisis that began in 1997. His populist economic policies have contributed to growth in the past four years.

Rising oil prices helped cut growth predictions last year, but economists expect an expansion of five to six percent in 2005 - and that should help Mr. Thaksin's Thai Rak Thai party at the ballot box Sunday.

His populist policies - dubbed Thaksinomics - were aimed at stimulating consumption through substantial government investment at the provincial and grass-roots levels. Measures included loans for thousands of villages, debt suspension for farmers, and a cheap health program.

The prime minister, addressing journalists last October, was in no doubt about the effectiveness of his economic medicine.

"I am proud at saying that our policies have clearly borne fruit with a drastic improvement in our economic figures. Indeed over the past four years Thailand's GDP [gross domestic product] has grown by almost 35 percent to around $165 billion today," said Thaksin Shinawatra.

Critics worry about the long-term affects of these policies, saying they could strain the national treasury and end up making rural communities indebted to the government. They also question the sustainability of the policies, especially if the world economy goes into a recession and tax revenues dry up.

There also are worries that his polices will push consumers to spend extravagantly and take on debt. During the high-growth years of the 1990's, confident Thai consumers and businesses racked up huge debts buying luxury cars and building luxurious office towers. When the financial crisis hit, thousands of people and companies went bust, worsening Thailand's economic woes.

Mr. Thaksin brushed off the fears that his policies would generate excessive spending.

"There are those who declare our policies were doomed to fail and yet such policies have succeeded remarkably," he said.

His policies have received a thumbs up from many economists. In a report released last month, Phatra Securities, found that spending on the populist policies accounted for 7.5 percent of overall economic output, but had injected $7.8 billion into the economy.

Thailand's economic performance also has been helped by a resilient international economy, continuing inflows of foreign investment and a strong trade performance. Thailand is forging bilateral free trade agreements with Australia and China and negotiating similar deals with the United States and New Zealand.

Arporn Chewakrengki, chief economist of the Government Pension Fund, notes that Mr. Thaksin has identified infrastructure spending as a plank in the government's growth strategy during a second term.

"The government has a clear agenda that they are pushing forward a lot of mega projects," said Arporn Chewakrengki. "They are talking about infrastructure projects like about two trillion baht in the next four to five years."

But many critics, including civic groups, journalists and academics, still worry that people are being encouraged to spend beyond their means.

Joe Maier, a Catholic priest who has worked in the Bangkok slum of Klong Toey for the past three decades, fears for the worst.

"I am really frightened," said Joe Maier. "I think it is all going to go to hell in a handbag very, very soon, I am frightened. I mean everybody in the country has tripled in debt as they were three years ago, and sooner or later you have to pay the piper."

The critics also complain about the government's cozy relationship with business - Mr. Thaksin has likened his position to that of a corporate chief executive officer and has included several prominent businessmen in his cabinet - and say they fear cronyism in business dealings.

Mr. Thaksin insists his economic program is on target and will succeed. And he appears to be winning the argument with voters - for now.

But he will face fresh challenges to his spending programs if the international economy slows and tax revenues fall in the years ahead.

XS
SM
MD
LG