Friday, 9 September 2011

Thailand Economy review

BANGKOK, Jan 13 – Thailand’s economy in 2011 is projected to expand by only 3.2 per cent, the lowest level in Asia in the past five years, dropping from last year’s economy, which grew by 7.5 per cent, Frederico Gil Sander, World Bank economist in Bangkok said on Thursday.

According to the World Bank’s latest ‘Global Economic Prospects 2011,’ Mr Sander said that last year’s Thai economic growth marked the highest level in Asia but the Gross Domestic Product (GDP) in the third and fourth quarters of 2010 gradually declined.

Meanwhile, the country’s tourism sector has not yet fully recovered due to the small number of tourist arrivals from US and Europe.

Owing to the economy in the last two quarters of 2010 and slow recovery of tourism industry, the World Bank forecast that the GDP in 2011 is unlikely to expand by 5 per cent in accordance with its potential growth rate, but will slow to 3.2 per cent, the lowest economic growth in Asian countries.

Mr Sander also said last year has seen the large and most volatile foreign capital flows. However, he expected that the US government will apply measures related to capital injection to boost its economy for gradual recovery. This will lead to a decline in foreign capital inflows in contrast with last year's surging capital flows and that will help stabilise currency exchange rates across Asia as well as for the Thai baht.

Regarding Thailand's political uncertainties persisting for years, the World Bank economist said the factor does not markedly impact on investor confidence. On the contrary, this year’s planned general election will likely encourage domestic consumption and the government’s ‘Pracha Wiwat’ (People’s Agenda) welfare scheme will stimulate domestic spending as well.

He also pointed out that a risk to Thai economy in 2011 is European debt crisis which remains unstable and fragile, adding that if the situation worsens, it will cause negative impact on Thailand’s economy.

Moreover, faster-than-expected high inflation rate should be concerned. If the central bank’s Monetary Policy Committee raises the policy interest rate too quickly, it may cause a stagnation in domestic demand and later may affect the overall economy.

However, if the political situation is more stable or otherwise sends a positive signal, the World Bank may raise Thailand’s economic growth in 2012 to 4.2 per cent, Mr Sander explained.

In addition, the World Bank’s latest ‘Global Economic Prospects 2011' also predicted that China's economy, the biggest emerging economy, is to grow 8.7 per cent this year, followed by Laos at 7.5 per cent, Mongolia at 7 per cent and Vietnam 6.5 per cent. (MCOT online news)

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