Fin Min: Thai economy to shrink about three percent in 2009


Thailand’s Ministry of Finance today said Thai economy is likely to contract by 3.0 percent or within the range of 3.5 and 2.5 percent this year.

Dr.Ekniti Nitithanprapas, director of Macroeconomic Analysis Group at the ministry’s Fiscal Policy Office (FPO), said on his behalf of the ministry’s spokesman that the Thai economy is projected to start recovering gradually after reaching its bottom during the first quarter of the year, mainly due to the government’s attempt to accelerate public consumption and investment expenditures through its stimulus packages.

However, Dr.Ekniti said, the country’s economy would still face risks from severe economic contraction among major trading partners, the slow recovery of domestic private spending and the rise in unemployment while the internal economic stability is expected to improve, with the inflation is projected to decline to zero percent due to the decrease in oil prices and the strengthening of the baht.

The macroeconomic expert said the ministry expects this year’s export volume to considerably shrink about 16.9 percent or within the range of 16.4 to 17.4 percent while the import volume to decline by about 25.4 percent or within the range of 24.9 to 25.9 percent.

He said the private investment is projected to contract by about 12.4 percent or in the range of 11.9 to 12.9 percent as investors delay their investment decision following the drop in foreign and domestic purchase orders.

Meanwhile, he said, the private consumption is projected to decline by about 0.3 percent or in the range of 0.2 to 0.8 percent because of the decline of household income and the uncertain employment situation.

Household income, he said, is declining as a result of falling farm income due to falling global prices of agricultural produces while uncertain employment situation is depicted by the decreasing average work hours of laborers and the growing trend of unemployment.

The government’s mid-year supplementary budget and the country’s declining inflation should support private consumption, he said.
He also pointed out that the main factor which would alleviate the contraction of the Thai economy is the accelerated disbursement of government expenditures through government consumption and investment in terms of economic stimulus packages 1 and 2.

Regarding the country’s economic stability, the ministry believes the internal stability will improve, with headline inflation to fall to zero percent due to lower crude oil prices than last year’s 2008 level and the appreciation of the baht while the core inflation, which excludes energy and food prices, to fall to 0.5 percent.

The main risk for internal economic stability, Dr.Ekniti said, is the unemployment rate, which is projected to rise to 2.5 percent of labor force as the economy contracts.

On external stability, he said, this year’s current account is projected to record a large surplus of 9.0 percent of gross domestic product (GDP) as the trade balance reaches the historic high surplus of $20.4 billion or within the range of 19.4 to 21.4 billion USD.

The large surplus is due to the greater fall in import value relative to export value. He said the export value is forecasted to contract about 20.2 percent or within the range of 19.2 to 21.2 percent while the import value is projected to significantly decline from the high base last year to 31.7 percent or within the range of 30.7 to 32.7 percent.