- By Pooky, this blog economics journalist
All that money being pumped into the Thai economy with the stimulus even got the IMF to projects a 4.7% GDP growth for Thailand and even the Thai long-term planner says the Thai GDP will be about 5.5%.
The last time so much money was pumped into Thailand through borrowing, saw the economic hit man buffeting Thailand’s currency till Thailand went bankrupt and landed in the IMF hands.
Now academics have said for a long-time now that if Thai growth does not excel beyond like 3.5%, the debt load will bankrupt Thai finances.That is to say, fast growth is needed to stay ahead of the debt shadow of repaying the debt.
And with the recent ballooning of the government borrowing starting to put the deficit into super massive level, already academics say they rather see less borrowing and deficit. The Abhisit government paused to listened, for about two weeks, but then need the spending to keep the government happily together, so the borrowing and spending continues.
What that means simply, when you pump borrowed money in, to get high GDP, is that Thailand will be addicted to “Crack Cocaine” of high growth.
Well the economic hit man are a funny bunch.
They hit like when you never know about it. Last time they hit Thailand, even Moodys and Standard and Poor did not have a wind of it. When the economic hit man hit the US, again even Moody and Standard and Poor did not know about it.
But the bottom-line is, where is the great wealth for the economic hit man to loot. Like state enterprise privatization? Well there is just one or two major ones left. Then with currency, well the Thai foreign reserves is now massive and can pretty much withstand a currency attack.
But what about massive lending opportunity?
Like the scenario is that all this borrowing Thailand is making to speed up the economy-ahead of real sustainable growth in a slow growth and risky Thai and global economic environment-will most likely lead to a continuous borrowing trend and re-financing to be ahead of the debt shadow. So bankers will off course be greatly happy, Thai and foreigners.
- Well this blog expects Thailand will get hit by the economic hit man for sure. This time it will be the government finances that gets looted. And as predictable, the Abhisit government is already talking about raising taxes-to cover that deteriorating finances.
But guess what, when tax goes up-consumption goes down and thus the economy slows down. All of that to say off course, that the high growth is not sustainable and the borrowing is not sustainable.
And when hit man finishes the looting, the government will have no alternative but go looting the Thais for more taxes-meanwhile GDP drops to rock-bottom.
Then the IMF would come around ans say, “Well, what can we say, you pumped in the money and we call the GDP as we saw it. But the rest is still up to you.”
- Oh, then the currency is next off-course.