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7 Apr 2010

Thai Economy

Politics Shrink Tourism, but Exports boost GDP to 3.5-6.0% Growth (Business Brief No.2795)

The political protest dispersed throughout central Bangkok without apparent end has not only affected tourism, but also retail trading and business in other areas, including those along routes of rally marches, as seen in the diminished turnover reported by some businesses within the protest areas.
Conversely, however, exports during the first 2 months of this year grew well. Although it is projected that this growth may decelerate later on due to last year's base effect, it is quite possible that overall export performance in 2010 will achieve double-digit growth, thanks to the steadfast global economic recovery and benefits from wider coverage due to trade liberalization. Despite the drastic impacts on many businesses, if the export sector can continue so well despite intensifying political problems (that may affect domestic and international transportation links), it is expected that overseas demand should prop up the Thai economy more than previously thought.
With the uptrend in export, tourism, consumption and investment sector economic indicators over the first 2 months, despite the slight impact of the political situation in March, KASIKORN RESEARCH CENTER (KResearch) projects that the Thai economy in 1Q10 may grow as much as 8.0-9.0 percent YoY, which would then be the most rapid growth in more than 6 years. This high rate of expansion during the quarter will be helpful toward boosting the whole year growth figure. Therefore, although political impacts have been taken into consideration, it is possible that the 2010 GDP may grow much more than earlier thought.
KResearch estimates that the Thai economy in 2010 will grow in a range of 3.5-6.0 percent, higher than the forecast in February at 3.0-4.0 percent. The impact from political unrest may cause losses to the Thai economy costing perhaps 0.2-1.5 percent of the GDP growth – valued at around THB23-150 billion – depending on the severity of the situation.
Due to uncertainty in domestic politics at this time, we may express a point of view that the economic figures that are healthy during the first quarter and help the whole year average may still not assure the robust recovery we expect. In particular, we have to admit that the high growth seen so far this year is mainly being driven by large export businesses, while SMEs are showing less potential, especially those related to tourism that are being seriously affected by the political discord. Our sole dependence on exports as a driving force may lead to the risk of sensitivity toward a volatile global economy, too. If politics remain unstable, its effect on the economy will be prolonged into next year and further deteriorate investor confidence toward our potential and economic stability over the long-term.
Thai Economic Projection, 2010

Units:% YoY unless otherwise noted
2008
2009
2010*
GDP Growth
2.5
-2.3
3.5-6.0
Brent Crude (USD/Barrel)
97.1
61.6
78.0-88.0
Private Consumption
2.7
-1.1
2.0-3.2
Investment
1.2
-9.0
4.0-8.5
Budget Deficit (% of GDP)
-1.0
-5.8
-4.0 to -3.0
Exports
15.9
-13.9
17.0-24.0
Imports
26.5
-24.9
29.0-36.0
Trade Balance (Billion USD)
0.1
19.4
6.0-8.6
Current Account Balance (Billion USD)
1.6
20.3
5.8-9.8
Headline CPI
5.5
-0.9
3.0-4.0
Core CPI
2.4
0.3
1.5-2.0
Unemployment (Thousand Persons)
514
571
400-450
Unemployment Rate
1.4
1.5
1.0-1.2
* Estimated by KResearch using data as of April 7, 2010.

Thai Economy