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20 Feb 2012

Thai Economy

Economic Recovery in 1Q12, GDP for 2012 Growing 4.5-6.0% (Business Brief No. 3249)

Thai economic figures for January 2012 showed signs of recovery following the calamitous flooding of 2011. In global matters, there have been positive developments seen in the US economy, though ongoing attempts by Eurozone states to solve the debt crisis have yet to bear fruit. Given this, KResearch expects that the Thai economy will perform well in 1Q12 with seasonally-adjusted growth of 12.5-13.5 percent QoQ, in line with relatively quick rebounds in several economic sectors amid ongoing post-flood rebuilding work. However, the over-year economic growth may remain low at 1.0-1.5 percent due to a high base from last year.
As for the outlook on coming quarters, the Thai economy should continue to be supported by a gradual rebound in our manufacturing sector, plus increased budgetary disbursements and higher minimum wage scales. Due to a sharp fall in economic value during 2011, it is expected that the economy will likely grow quite fast for a while. As a result, we at KResearch have raised our projection for 2012 to perhaps 5.0 percent growth in our base-case scenario, or within a range of 4.5-6.0 percent (versus our previous base-case forecast of 4.3 percent, or within a range of 3.5-4.8 percent). Nevertheless, our economy will continue to be threatened by some headwinds, especially a fragile global recovery inhibited by the lengthy Eurozone debt crisis, rising crude oil prices driven by Mideast tensions and internal risks that may stem from political problems and natural disasters.
Although post-flood spending will give a short-term boost to the economy, it is inevitable that the massive economic losses we suffered will be a major factor in investment decisions, particularly at multinational companies that may be reconsidering alternative investment locations.

Looking ahead, the Thai economy is at a crossroads in building a new economic structure as our national competitiveness is being challenged by high production costs relative to other nations in the region. With that production cost gap set to widen on minimum wage increases here, it is deemed appropriate that our economic and industrial policies be steered toward facilitating business and industry to improve their value chain propositions using more contemporary knowledge-based solutions and human resource management.

Thai Economy