“Economy likely to grow 4% not 6 %”

At last ! At last I’ve found one economist with common sense in Thailand. Or at least who share my views.

Here are some quotes from the Thailand Development Research Institute.

“The Thai economy is expected to grow around 4 per cent this year, not 6 per cent as targeted by the government, if global oil prices continue increasing, according to the Thailand Development Research Institute.

But what should be of concern now is accelerated inflation in the next three to four months due to a further increase in product and fuel prices.

He said the government’s efforts to inject money to help ease living costs of poor people are considered good policy, but the money must be distributed in a form of coupons, not cash, to the real poor.

Otherwise, it would fuel the current inflation trend.

Exactly. It’s totally stupid to try to boost the GDP, by spreading cash around with “stimulus packages” and public spendings, and meanwhile talk about inflation fears. Mechanically, in our current situation, the firsts will fuel the second !

“The government should not build a demand pool nor inject money to boost consumer purchasing power too much because it may push up the country’s inflation rate to stay close to 25 per cent, the rate Vietnam is now experiencing.

“Now, the actual interest rate is in a negative territory. Should inflation go up considerably, labourers may need to seek a further increase in wages. Likewise with producers, who want to raise product prices. If the costs of everything are high, the economy will further slow down,” said Mr. Somchai. (TNA)

Hear ! Hear ! Please note that real interest rates are negative… since january. And have been negative 32 months on the last 50… Look at my chart.

Furthermore, the spillovers effects (higher wages, therefore higher costs, then higher prices in a vicious loop) he’s talking about… are already happening. It’s the inflation tsunami I’ve described before.

As for the growth of GDP (annual rate), the topic, I said that the 6 % target will be difficult to reach. Inflation can’t be hidden anymore… It means the GDP deflator will increase too. And a higher deflator means a lower real GDP (and therefore, a lower growth year on year).

You don’t follow ? No problem, everything is explained there.

UPDATE
Amazing. The Finance Minister now agrees with me… I should ask for a job !

Economic growth could fall below 6 per cent this year due to soaring oil prices and political uncertainties, Finance Minister Surapong Suebwonglee said yesterday.

“At the beginning of the month, we still viewed the situation optimistically, that our stimulus measures would be sufficient to manage the situation,” he said. “But today, we see things different than we had forecast, both in terms of oil prices moving rapidly upward and in terms of politics.” (Bangkok Post)