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19 Nov 2009

Thai Economy

Thailand’s GDP: 2.3% Growth Likely in 3Q09, but May Decelerate in 4Q09 (Business Brief No.2688)

According to economic indicators that were released recently, Thailand’s GDP in 3Q09 will likely show a more rapid than expected improvement, thanks to the economic recoveries in many countries and the effectiveness of our economic stimuli that have played a great role in helping to boost the GDP as seen in 2Q09. KASIKORN RESEARCH CENTER (KResearch) expects that the seasonally-adjusted 3Q09 GDP will show growth of 2.3 percent QoQ, similar to 2Q09. However, it will likely contract (-) 3.3 percent YoY, improving over the contraction of 4.9 percent seen in 2Q09.
For the outlook, KResearch expects that the Thai 4Q09 economy will likely show growth YoY, though decelerating QoQ. Although the GDP will likely be boosted by accelerated government budgetary disbursements, plus the “Thai Kem Kaeng” investment program and global economic recovery, there will be many internal and external economic risks evident over the remainder of 2009:
¯ G-3 economic recoveries are still fragile because there are some negative factors in high unemployment rates that may hamper those recoveries.
¯ Although Asian economies will likely show stable recoveries, there are some risks that will need careful monitoring, particularly unsustainable recoveries kept going by economic stimuli as that may lead unbalanced economies where bubbles or oversupply occur that could cause relapses into new recessions.
¯ The US Dollar’s depreciation may exacerbate inflation because surging commodity prices will pressure consumer spending worldwide, including in Thailand.
¯ Domestic political crises will probably cause a deterioration in foreign relations with our neighbors. These political crises will also lessen the confidence of private sector, tourism industry and weaken the stability of the government, which will likely interrupt progress in economic policy implementation. Meanwhile, people are concerned about the conflicts between Thailand and Cambodia that could prolong economic problems.
¯ Unclear legal definitions will likely affect investments in some industries, such as business activities that adversely affect the environment and communities, as seen at the 76 suspended Map Ta Put projects. In addition, there are some legal issues that become to be obstacle for granting new investments in the telecommunication business.
Overall, the 3Q09 economic recovery will likely be better than expected. Hence, KResearch has decided to improve our projection on the Thai economy in 2009 to a contraction of only (-)3.3 percent, against the former projection of (-)3.5 to (-)4.1 percent. Meanwhile, it is expected that economic growth in 2010 will likely rise moderately at 3.0 percent. KResearch
Estimate of Thailand's Economic Growth in 3Q09 and Overall 2009
Growth
2008
4Q08
1Q09
2Q09
3Q09F
2009F
GDP (YoY)
2.6
-4.2
-7.1
-4.9
-3.3
-3.3
GDP (% QoQ, SA)
n.a.
-5.9
-1.8
2.3
2.3
n.a.
· Source:: Office of the National Economic and Social Development Board
· Forcasted by: KASIKORN RESEARCH CENTER

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