Thailand’s finance minister warned on Tuesday that the economy could contract sharply and millions would be jobless if parliament did not approve government plans to seek US$2 billion in foreign loans.
Parliamentary approval is needed for the seven-to-ten-year loans from the World Bank and others, aimed at limiting the slowdown in the economy caused by the global financial crisis.
“If the government does nothing, the economy could shrink 8-9% and as many as 2 million will be out of work,” Finance minister Korn Chatikavanij told parliament.
“So the government has to do everything to fix the economy. The government needs to borrow to push the economy ahead… It’s undeniable,” Korn said, adding the country’s financial and fiscal position was strong enough for it to take on more debt.
The government plans to borrow US$1 billion from the World Bank and US$500 million each from the Asian Development Bank and Japan International Cooperation Agency.
After parlimentary approval, the government would start talks with the lenders, and the final terms would have to be approved again by the cabinet and parliament. The government has said it expected to receive the loans in the third quarter of this year.
Like other governments around the world, Thailand has launched stimulus measures to limit the impact of the slowdown.
But Korn said on Monday that, even with the measures, the economy could shrink 3% this year, after 2.6% growth in 2008.
The government has previously warned that unemployment could double to around 1 million this year. In the final quarter of 2008, the economy suffered its worst quarterly contraction on record, a seasonally adjusted 6.1%.
The latest Reuters poll of economists on March 18 forecast a contraction of 1.5% in GDP in 2009 and growth of 2.9% in 2010.
Thailand has been hit by both shrinking demand for its exports due to the global economic slowdown and weak consumer confidence after months of political unrest.