If inflation remains low, the policy rate could be slashed again, Chalongphob said, while pointing out that the decision was completely up to the Bank of Thailand and its monetary policy committee to take at their May 23 meeting.

The central bank lowered its one-day repurchase rate to 4 per cent last month, when inflation was only 1.8 per cent compared with 6 per cent in April last year.

The finance minister was a speaker at a seminar hosted by The Nation and Krungthep Turakij on the subject of "Towards Thai Economy Recovery".

He also said that with public debt at a lower level, the Finance Ministry had leeway to implement more fiscal expansion policies on top of the recently launched Bt44-billion loan package for low-income groups.

There could be a tax cut to support real estate and other sectors of the economy, he said, hinting that more fiscal measures were on their way.

While the government plans to accelerate construction of the Red and Purple mass transit lines in Bangkok this year, the Finance Ministry would also push forward its plan to commercially develop its Mor Chit site.

Chalongphob will meet with 10 carmarkers on Monday to discuss tax incentives for developing fuel-efficient vehicles.

The government has started to pump money into the economy as state spending in the first quarter jumped by 29 per cent, he said while conceding that protracted political uncertainty has sapped consumer and investor confidence.

He was optimistic that the political situation would settle down in two or three months. Then the economy would recover quickly. Export growth of 18 per cent in the first quarter suggested that economic fundamentals remained sound.

Foreign investors are still interested in the capital market here due to its development after the 1997 Asian finance crisis. Their net purchases testify to that, he said.

Chalongphob admitted that strong capital inflows had put heavy pressure on the exchange rate, and Thailand needed the cooperation of other East Asian countries to cope with the flying baht.

Somjai Phagaphasvivat, a political scientist at Thammasat University, criticised the government for failing to satisfy the public.

While economic indicators were not bad, expectations were severely crushed, he said.

He was concerned about the political scenario after the general election at the end of this year. The political system would be a drawback, as the new government would not be stable and may be in office for seven or eight months at most. However, people and investors would get used to it and conduct their lives and business as usual, he said.

Korn Chatikavanij, deputy secretary-general of the Democrat Party, condemned the government and the central bank for their slowness in addressing current issues.

The government has been trying to fix the nominee problem following the sale of Shin Corp, but it has failed to address the decline in private investment, he said. And the central bank is stuck to its policy to curb inflation by maintaining high interest rates while inflation had been eased.

Somchai Jitsuchon, an adviser to Chalongphob, said if growth this year came in at 3.5 to 4 per cent, off from its potential rate of 5 per cent, that would be acceptable. In this case, there would be no need to implement greater economic stimulus. However, strong measures might be needed if growth fell up to 2 per cent behind its potential.

Teerachon Manomaiphibul, an executive of Property Perfect Plc, demanded that Chalongphob quickly rescue the real estate sector. He said consumers had put off buying a home due to the unclear policy of the government regarding tax breaks for property sales.

Pisit Lee-artham, a constitution drafter, said challenges would lie ahead for the new government, which is required to have a clearer budget-spending framework under the new constitution. The new government would need to identify all kinds of expenditures, including those for local governments and independent organisations, as a way to prevent the use of off-balance budgets to promote its populist policies.

"In the future the government will increasingly depend on the off-balance budget via different entities. It's not enough to monitor and scrutinise just the central budget. So the new [charter] draft will encourage transparency of spending but still allow the government to work to the utmost," the former deputy finance minister said.

The government needed to clarify its purpose in collecting taxes and in spending the budget, which must be done productively, prudently and transparently. The central budget under the Prime Minister's Office must be set aside under clear guidelines to prevent extravagant splurging. The carry-on budget and public borrowing must also be planned according to specific standards.

The new constitution would include mandatory savings by all people, as it is estimated that only three million can enjoy their current level of comfort when they reach retirement age.

Wichit Chaitrong,

Anoma Srisukkasem

The Nation