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24 Nov 2008

Thai Economy

3Q08 GDP Growth Down to 4.0%, Further Slowdown Likely in 1H09 (Business Breif No.2359)

  • The Office of the National Economic and Social Development Board (NESDB) has reported that the 3Q08 GDP stood at 4.0 percent, down from 5.3 percent in 2Q08. The growth, which was lower than expected, stemmed mainly from the political unrest in September that deferred decision-making on foreign investments and tourist arrivals. The NESDB also revised downward the economic growth projection for 2008 to 4.5 percent from the previous 5.2-5.7 percent. Meanwhile, the Thai economy in 2009 is projected to grow in a range of 3.0-4.0 percent.
  • KASIKORN RESEARCH CENTER (Research) takes the view that during the next few quarters ahead, attention should be paid to the ramifications of the global financial crisis on Thai exports due to ebbing foreign demand. So far, our export sector has already felt the impact of global economic fragility. The next casualties will likely be businesses and workers within their supply chains, as well as the overall economy.
  • KResearch forecasts that 4Q08 GDP may record slower growth of lower than 3.0 percent. Our projection now stands at 2.8 percent, which would put the full-year economic growth at 4.5 percent, close to the NESDB projection. The impacts of risk factors will be felt increasingly over the next two quarters, and the Thai economy will likely encounter a severe slowdown to less than 2.0 percent GDP growth during 1H09.
  • Amid this gloomier economic outlook worldwide, KResearch has therefore cut our growth projection for 2009, with the median base case scenario at 3.5 percent, downfrom the previous forecast of 4.0-5.0 percent. In the worst case, we project that growth might stand at 2.5 percent.
The Thai economy, being threatened by numerous risks, is expected to encounter a severe downturn in the year to come. Many industries are feeling the impact of the crisis, resulting in curtailed production, temporary closures, lay-offs or even permanent shutdowns. This may eventually have repercussions on businesses and their workforces directly hurt by the global downturn and other related businesses. This is a real policy challenge. Unlike the Asian Financial Crisis that began in 1997, Thai economic fundamentals are now quite solid thanks to our external account stability and healthy financial system. Meanwhile, the government and the Bank of Thailand have more leeway to tackle these economic problems, whereas they seem to have had their hands tied during the 1997 crisis. Many are hoping that accommodative monetary and fiscal polices will help the country to survive this difficult and rapidly changing situation.
Estimate of Thai Economic Growth in 2009
2007
2008
2009
Unit: %, Y-O-Y (Unless otherwise stated)
Worst Case Scenario
Base Case Scenario
GDP Growth
4.9
4.5
2.5
3.5
Average Cost of Brent Crude (USD)
72.5
97.8
40.0
50.0
Private Consumption
1.6
2.4
0.6
2.0
Investment
1.4
1.7
-1.4
1.4
Government Budget (% of GDP)
-1.5
-0.9
-2.8
-3.8
Export Growth
17.3
19.0
-2.0
3.0
Import Growth
9.1
29.4
-3.0
1.0
Trade Balance (billion USD)
11.6
-0.6
1.2
2.9
Balance on Current Account
(billion USD)
14.0
0.0
1.9
3.9
Headline CPI
2.3
5.7
1.8
2.3
Core CPI
1.1
2.3
1.4
2.0
Unemployment rate (% of workforce)
1.4
1.4
2.6
1.9
Projected by KASIKORN RESEARCH CENTER as of November 2008

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