China’s economic slowdown poses a serious threat to Thai exports, but government efforts to push public investment and domestic consumption will cushion the country against heightening global economic uncertainty, says Finance Minister Apisak Tantivorawong.
The government is monitoring external factors including China’s cooling economy, geopolitical tensions in the Middle East and the direction of the US Federal Reserve’s interest rate, as they are global risk factors, Mr Apisak said, adding that if the global economy faced a hurdle, it would take a toll on the Thai economy, particularly outbound shipments.
“The government will provide full assistance to hard-hit people and low-income earners,” he said.
Mr Apisak said the country would feel less of an effect from global economic headwinds since the internal fundamentals were solid.
“Impacts on the financial and capital markets are normal. When a large economy has a problem, it has a ripple effect on small countries. It’s impact is global, not just on Thailand,” Mr Apisak said.
He added: “There’s no need to panic.”
The world’s second-largest economy is the biggest destination for Thai exports, accounting for 15-16% of last year’s total.
China is also a large trade partner with Thailand’s trade counterparts in Asean.
The Bank of Thailand recently cut its 2016 economic growth forecast to 3.5% from 3.7% due mainly to the sharper growth slowdown of China and other Asian economies.
The central bank also projects exports will record flat growth.
Meanwhile, Deputy Prime Minister Somkid Jatusripitak said Thailand’s strong economic fundamentals would be able to withstand volatility from China.
“Don’t worry about the impact, as the government has already taken care of the issue, but we don’t speak about it,” he said.
“I’ve already met with the Bank of Thailand governor and the finance minister. Regarding concerns over a currency war, the central bank has already taken appropriate measures commensurate with the economy.”
The government is steering the country towards a public investment- and domestic consumption-driven model amid the murky global economy, relying less on exports than in the past.
In a related development, Mr Somkid said the government was creating new engines for developing the grass-roots economy.
He set a policy for two state-owned banks — the Bank for Agriculture and Agricultural Cooperatives and the Government Savings Bank — to play a role in encouraging start-ups of farm-related small and medium-sized enterprises (SMEs), as they will be a game changer in the agricultural sector in terms of adding product value and innovation.
Agricultural SME operators will eventually become mentors of farmers, Mr Somkid said.
He said to support SMEs in the farming sector, the government would establish the SME Start-up Thailand Fund to groom future generations.
The country cannot leave 30 million people to share only 10% of GDP, as
Thailand cannot develop further if their quality of life does not improve, Mr Somkid said.
Even though 2015 economic growth is expected to come in at 2.9%, up significantly from 0.9% in 2014, people still feel the economy remains lacklustre due to the liquidity crunch hitting those at the lowest end of the income scale.
“We’ve chosen to take the difficult path, not the the easy one that could make people happy by only injecting money into their pockets,” Mr Somkid added.