The new government, led by Prime Minister Yingluck Shinawatra, has been urged to set economic policies in line with the trends of the global economy.

Mr. Tanit Sorat, Vice Chairman of the Federation of Thai Industries, said that the world economy is likely to face a slowdown after the first-ever downgrade of the United States’ sovereign credit rating by Standard & Poor’s Rating Services.

Mr. Tanit is also Vice Chairman of the Working Group on Macroeconomic, Financial, and Monetary Affairs, under the National Economic and Social Advisory Council. He told a seminar on the new government and sustainable economy on August 9 that populist policies that the Pheu Thai Party, the core of the new administration, promised in the election campaign would lead to overspending. The policies might put the country at risk in the long run.

As a consequence, he said, the government might have to face a budget deficit for another five consecutive years. If the government revises the law to allow it to expand the debt ceiling to over 60 percent of GDP, the country’s public debt will be higher. Today, Thailand’s public debt stands at 39.43 percent of GDP.

As for the country’s economic growth in the second half of this year, he believed that the growth rate would be 4.2-4.3 percent, as exports have continued to increase and prices of agricultural products are still high.

Mr. Tanit said that the populist policies of the new government were likely to have psychological impacts, thus increasing domestic consumption. Among them are the pledges to raise the daily minimum wage to 300 baht and to offer a 15,000-baht monthly starting salary for new university graduates working for government agencies and state enterprises. These policies would increase the inflation rate to between 3.8 and 4 percent this year. They would also affect Thai exports and foreign investment this year and next year.

He said that government’s economic team should work professionally, without using the “politics-leading-economy” approach in handling the Thai economy. More importantly, it should administer with transparency and good governance, based on the rule of law.

The Federation of Thai Industries is also working out guidelines for economic solutions to be submitted to the new government for consideration. It cited the higher cost of living as an urgent issue that should be tackled by the new government. Another urgent issue involves impacts of the global economic slowdown. The Federation called for special attention to the agricultural and industrial sectors, as well.