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Interview

Thailand eyes new stimulus to ease trade war shock

Finance minister vows structural reform and has 'open mind' on Facebook's Libra

Uttama Savanayana, Thailand's new minister of finance, speaks to the Nikkei Asian Review in Tokyo on July 31. (Photo by Ken Kobayashi)

TOKYO -- The Thai government is considering to work on "packages of economic activities" to stimulate its slowing economy, Thailand's new finance minister, Uttama Savanayana, told the Nikkei Asian Review in an interview in Tokyo on July 31.

Uttama said uncertainty over the state of the global economy has affected Thailand as well as other countries. "If necessary, I believe that the government will consider packages of economic activities that will be suitable for the next coming months, depending on the situation," he said.

The Thai economy faces strong headwinds from the U.S.-China trade tensions and the baht's rise against the dollar. Exports to China fell 15% in June from a year earlier, following a 7% drop in May.

Against this backdrop, the National Economic and Social Development Council, a Thai government think tank, lowered its economic growth forecast for the year to 3.3% to 3.8% in May from 3.5% to 4.5%.

During his campaign for a seat in the March parliamentary election as a leader of pro-military Palang Pracharath Party, Uttama promised Thailand would achieve 6% annual growth in its gross domestic product. He said it is too early to say whether that target is reachable during his term of up to four years, "given the global economy." 

Uttama's said his focus is on strengthening the foundations of Thailand's long-term growth. He aims to achieve this by upgrading the company's transport and digital infrastructure, as well as promoting industrial reform and helping Thai workers improve their skills.

The goal is to pull the country out of the "middle-income trap," that is, the tendency for countries to hit an economic ceiling after they reach a certain level of development. "We will do our best to achieve a growth rate that reflects the potential of the Thai economy." Uttama said, "We still believe that we can do that."

Thailand is highly dependent on exports, which account for 67% of its GDP. Tourism adds another 20%. Uttama said the government's moves to boost domestic demand will help "shield the Thai economy from the external impact of the trade war." 

Tax reform is also a part of the government's strategy to raise the rate of sustainable economic growth. Under the previous junta, laws levying taxes on inheritance, land and buildings, which aimed to narrow the gap between rich and poor, were passed for the first time.

Uttama has vowed to strengthen the foundations of Thailand's long-term growth though tax reform and infrastructure spending. (Photo by Ken Kobayashi)

During the campaign Uttama's party pledged to cut individual income taxes. He said the Finance Ministry is studying its options for tax reform, which he said would be "completed in the next coming month."

The government also hopes to strengthen taxation of cross-border electronic services, such as video streaming and online advertising. A draft "e-business tax law" was approved by the previous cabinet and is now under review by the Council of State, an advisory body, ahead of parliamentary deliberations. The tax "will be a growing source of revenue," Uttama said.

Regarding digital currencies, such as Facebook's Libra, Uttama said that he has "an open mind," as the country is seeking to innovate. Thailand has taken a more positive stance on Facebook's proposed e-currency than many other countries. "We are monitoring to see what the implications might be for us in terms of economic growth and in terms of the impact on consumers," said Uttama. "We will see what suits Thailand best."

Uttama is known as the right-hand man of Deputy Prime Minister Somkid Jatusripitak on economic policy and endorsed junta leader Prayuth Chan-ocha for Prime Minister during the campaign.

Uttama's visit to Japan is his first overseas trip since his appointment as finance minister. During his two-day stay, Uttama met his Japanese counterpart, Taro Aso, and Japanese business executives.

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