Thai economy clearly slows down but should pick up in Q3




The Fiscal Policy Office (FPO) yesterday said the economy in December and the entire fourth quarter of last year showed several signs of significant slowdown.

However, the Center for Economic and Business Forecasting (CEBF), University of Thai Chamber of Commerce, today projected that it is expected to turn around in this year’s third quarter.

Dr.Somchai Sajjapongse, director-general of the FPO, said the country’s export in the fourth quarter had contracted for the first time in seven years by 10.6 percent from the previous year to US$38.7 billion, mainly due to the slowdowns in economy among Thailand’s major trading partners and the additional impact from the temporary airport closures which hindered export of goods.

Private consumption in the quarter also continued to slow down as consumption indicator from real-term value-added tax collection grew only about 0.1 percent from the same period of the previous year, compared with 16.1 percent in the third quarter.

Private investment in the quarter weakened while the country’s real estate sector slowed down in line with lower demand, seeing real-estate tax collection in the quarter contracted by 5.6 percent over year and the 22.2 percent growth in the third quarter.

Fiscal indicators showed that net government revenue collection in the quarter, which is the first quarter of Thailand’s fiscal year 2009, was about 272.8 billion baht, down 16.1 percent from the same period in 2007, partly from the slowdown in domestic economy and the impact from excise tax reduction for gasoline as one of the then government’s economic stimulus measures.

Income-based tax grew merely 0.3 percent over the same period of 2007, from 17.4 percent growth in the third quarter, reflecting weaker performance in business sector as well as the lowering income from the economic slowdown.

The government expenditures in the quarter amounted to 404.3 billion baht, expanding from the same period of the previous year by only 2.8 percent due to the low level of budget disbursement in October 2008 as a result from the delayed implementation of fiscal year 2009 budget act.

Meanwhile, Dr.Thanavath Phonvichai, CEBF director, said the country’s economy is likely to shrink by 3-4 percent in the first quarter of this year and around 0-1 percent in the second quarter.

He said the government’s fiscal policy to inject funds into the economy amounting to 300 billion baht through both the central budget and tax measures should help turn around the economy in the third quarter of this year.

The economy will begin to recover in the third quarter of this year with a growth of about 1-2 percent and then grow 3-4 per cent in the fourth quarter, helping this year’s economy to expand 0-2 percent.

However, he said, key factors needing to be closely monitored will include world economic recovery, domestic political uncertainties, 2010 budget deliberation and oil price volatilities.

In addition, Prime Minister Abhisit Vejjajiva’s plan to organise present roadshows in many countries could help restore foreign investor confidence in Thailand while the US Congress’ approval of the US$800 billion economic stimulus package would help improve the overall global economy including the Thai economy, he added.