So, the Thai economic condition appears to have improved. The Bank of Thailand has just raised its economic forecast for this year to minus 2.5 per cent to minus 3.5 per cent on signs that the nation is emerging from the recession. Earlier, the central bank pinned the growth forecast at minus 3 per cent to minus 4.5 per cent. At the same time, as pointed out by Paiboon Kittisrikangwan, the assistant governor, consumer prices may fall 0.5 per cent to 1.5 per cent.

Inflationary pressure is one of the policy dilemmas facing the monetary authorities. The central bank still keeps its benchmark rate at 1.25 per cent, believing that the recovery is fragile. As a rule of thumb, the interest rate should not be kept below the inflation rate for too long. Normally, the interest rate must hover above the inflation rate to curb inflation.

Yet there are several economic complications that do not permit a hasty rate hike - a low capacity utilisation of industries, at 60 per cent, and a drop in the purchasing power of farmers by 18 per cent in the second quarter and the third quarter. Moreover, motorcycle sales also fell 9.4 per cent and 12 per cent over similar periods.

All of this suggests that Thailand still depends on exports as the engine of growth.

Once interest rates rise in Thailand, capital will flow in. The US rate is now dangling at zero per cent. A rush to raise the Thai rates would induce further capital inflow and strengthen the baht.

While the Thai recovery remains weak, the Abhisit government has ploughed in a series of stimulus measures. Next fiscal year, deficit spending will equal about 7 per cent of gross domestic product, a record high in recent memory. After that, the government hopes that it can gradually pull out to allow the private sector to take charge in investment to lift the economy.

Supavudh Saicheau, the managing director of Phatra Securities, yesterday sent out a stern warning that if the 76 projects at the Map Ta Phut Industrial Estate in Rayong are kept on hold, Thai economic growth prospects will be put at risk. For Thailand has increasingly become industrialised. Since 1980, when the Map Ta Phut Industrial Estate took off, real economic growth averaged 5.8 per cent a year, compared with 7.8 per cent for manufacturing and 3.1 per cent for agriculture. At the same time, inflation averaged 4.1 per cent.

In 1990, manufacturing accounted for 25 per cent of GDP, but in 2008 it increased to 40 per cent. Over this same period, agricultural output in relation to the GDP hardly charged, staying at around 10 per cent.

Supavudh warned that if the proposed 76 industrial projects are not allowed to proceed with their investment, Thai growth in the medium term will come under threat because there will not be any other engine to drive growth.

The whole scenario I have just pointed to represents the modern-day view of economic thinking. First, we have to rely on exports. Second, we have to support industrial investment. Third, we have to keep the baht weak or competitive. Fourth, we have to depend on foreign investment. Fifth, we have to further promote capital market development.

This modern-day view of economic management in Thailand has never addressed the looming questions. First, how should we adjust our economy in the event of a dollar and global financial system crisis? Second, how should we hang on if the recession continues for many years to come? Third, are we prepared to face the erratic consequences of climate change? Fourth, how are we going to use energy if we no longer can afford to import?

These are pertinent questions that need to be addressed beyond the modern-day framework of economic policy planning. If we don't start getting prepared now, it could be too late when the perfect storm hits.

By Thanong Khanthong
The Nation