BANGKOK - The Thai economy has struggled free of recession, but latest data is hardly encouraging for a government that is banking on a recovery in slumping exports to offset the heavy cost of populist policies aimed at preserving its power.
Exports, which account for more than 60 per cent of the economy, fell 6.3 per cent in September from a year earlier and private consumption dropped 1.3 per cent from August. Private investment remained flat, according to Bank of Thailand (BOT) data released on Thursday.
Gross domestic product data will be released on Nov. 18, and the central bank said on Thursday it will show Thailand making a tentative recovery from its first recession in five years. Mathee Supapongse, senior director of the Bank of Thailand's macroeconomic and monetary policy department, said Southeast Asia's second largest economy would show quarter-on-quarter growth in the three months through September, ending the technical recession it entered in the first half of the year.
"We may not see any dramatic improvement yet," Supapongse, told a news conference.
The trade, consumption and investment figures hardly inspire confidence, however, and do little to ease the multiple problems faced by Prime Minister Yingluck Shinawatra's government.
Analysts reckon the government will need to spend to strengthen the recovery. The government says its fiscal position is strong, but spending on populist schemes is jeopardising chances of meeting its goal for balancing the budget.
Pulling the plug on a rice price guarantee scheme for farmers might help stem the losses of billions of dollars of state funds, but Yingluck would risk losing crucial support from her rural vote bank by doing so.
Farmers helped Yingluck sweep to power in 2011, when she promised to bring back the subsidies and handouts that helped her brother Thaksin Shinawatra win two terms in office.
The rice policy has been a disaster, however, with losses of 136 billion baht (S$5.4 billion) in the 2011-2012 crop year. After that, the government ceased reporting the scheme's losses, though former central bank governor and finance minister Pridiyathorn Devakula recently estimated the total at 425 billion baht.
Weak external demand for the high-priced grains has left Thailand with as much as 17 million tonnes in storage. Shipments for the nine months through September were down 0.5 per cent in value terms year-on-year, after a 28 per cent fall for the whole of 2012. "The government underestimated the global economic conditions when it started the rice pledging scheme and now it can't back down," said Kan Yuenyong, director of the Siam Intelligence Unit think tank.
"They're betting they can prolong it and pretend nothing's happening. The government is facing some strong opposition forces right now and it doesn't want to lose its voter base."