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5 Feb 2010

Thai Economy

Agriculture, Exports, Tourism and Government Stimuli Will Boost GDP Growth to 3-4 Percent in 2010 (Business Brief No.2752)

Based on robust economic data released in December 2009 showing record growth in industrial production and tourism, plus higher agricultural prices that helped bolster Thai economy in 4Q09, KASIKORN RESEARCH CENTER (KResearch) projects that the seasonally-adjusted GDP for 4Q09 will likely have expanded 1.9 percent QoQ, and thus would be higher than the 1.3 percent growth recorded in 3Q09. When compared to 2008, the 4Q09 GDP may have grown 4.5 percent YoY, versus the (-)2.8 percent contraction seen in 3Q09, representing a turnaround to growth for the first time in five quarters.
Due to the better than expected economic improvements seen in 4Q09, KResearch projects that the Thai economy may have contracted only (-)2.6 percent in 2009, which would be higher than previous projection. In addition, positive factors that helped drive the Thai economy in 2009 will continue the momentum in 2010, thus boosting the economy to growth this year. The 2010 growth rate will likely be higher than previously expected, thanks to the more solid global economic recovery, increased flexibility in the government's economic stimulus measures and continuing increases in farm produce prices. Because of this, we have revised our 2010 growth forecast to 3.0-4.0 percent, higher than the 2.5-3.5 percent pace projected before.
Regarding the short-term outlook in 1Q10, Thai economy will likely be pressured by many negative factors, especially the intensifying political situation that will affect climate of consumer spending, tourism and investment that were improving previously. Some anxiety toward the Map Ta Phut environmental impact cases is another factor that may erode the investment climate. However, the situation in 2H10 will likely improve, thanks to the government's budgetary disbursements for the ‘Thai Khemkhaeng' program and other major investment projects that should aid in progress. Also, a solution to the problems with Map Ta Phut investment projects may be found. Moreover, it is expected that easing political conflicts would contribute to a more stable and healthy recovery later on.
The main Thai economic risks in 2010 would concern political uncertainty – a factor that should be closely monitored – plus the problem of the suspended Map Ta Phut investment projects. Regarding that, KResearch views that the government should urgently seek to outline regulations and guidelines in accordance with the requirements in Section 67 of the 2007 Constitution, and make matters clearer for investors.

Meanwhile, accelerating inflation may reduce consumer spending. On the part of international economies, the global economic recovery in 2010 should improve greatly, though there are some risks in each global region, such as high unemployment rates in developed countries and economic instability in some emerging economies that face the problems of bubble risk and high debt burdens.

Thai Economy