Global crisis, political unrest to cut Thai growth

BANGKOK, Dec 11 - The global economic crisis and Thailand's political turmoil will probably cut the nation's economic growth to the slowest pace in eight years in 2009 before a modest recovery in 2010.

A quarterly Reuters survey of 10 economists forecast growth of 2.8 percent next year, sharply down from the 4.9 percent predicted in September and 4.5 percent growth expected for 2008.

Growth should rebound to 4.0 percent in 2010 provided a recovery in Thailand's major export markets, economists said.

"A severe economic slowdown should be felt in 2009, especially during the first half, when annual growth may be less than 2 percent," economist Charl Kengchon of Kasikorn Research Centre said.

Exports, which account for more than 60 percent of Thailand's economic output and are a major growth driver, will be hard hit by recessions in the United States, Japan and the European Union, which together buy over a third of Thailand's shipments overseas.

Kasikorn forecast exports would grow just 3 percent in 2009 after a 19 percent rise in 2008, with a significant risk of a 2 percent drop if the global downturn is more severe than expected, it said.

The state planning agency, the National Economic and Social Development Board, forecast in late November that the Thai economy would expand by 3 to 4 percent in 2009.

Showing concern for a fast-cooling economy, the Bank of Thailand slashed interest rates by a full percentage point last week, the biggest cut in at least eight years.

The central bank and analysts say political unrest in Thailand could limit any benefits the economy would get from stimulus spending by the government.

The prime minister was forced by the courts to step down on Dec. 2 and analysts expect Thai political parties to take at least a month to form a new coalition government, which will face the daunting task of trying to pacify deeply divided political groups while managing the fast-slowing economy.

The vital tourist sector is bound to be badly hurt by a recent politically motivated blockade of Bangkok's main airports, which left hundreds of thousands of foreigners stranded.

"Large, multi-faceted problems are awaiting the new government, which will have to cope with likely violent opposition at a time when Thailand needs to try to catch up with its neighbours in terms of economic growth," political scientist Somjai Phagaphasvivat of Bangkok's Thammasat University said.

"Even if we get a government of better quality, we would be lucky to get GDP growth of 1 to 2 percent next year." Results of the survey:

GDP CPI TRADE BALANCE

pct change pct change US$ bln

2009 2010 2009 2010 2009 2010 Action Economics 2.5 4.0 2.0 2.5 -5.0 5.0 Capital Nomura 3.0 ~ 4.0 ~ 2.7 ~ JP Morgan Chase 2.0 4.0 0.5 3.3 1.8 1.9 Kasikorn Res 3.5 4.5 2.3 3.0 2.9 -0.5 Phatra Sec 3.3 4.0 3.0 3.0 2.5 -0.1 SCB Sec 2.5 4.0 2.0 5.0 -2.8 0.7 SCRI 3.0 4.1 1.8 2.7 -2.0 1.5 Stanchart 3.0 4.5 2.5 3.0 -7.5 ~ Tisco Sec -0.8 2.5 1.6 3.4 -1.0 ~ UBS 1.8 3.6 3.0 2.6 ~ ~ -------------------------------------------------------- Median 2.8 4.0 2.2 3.0 -1.0 1.1 Median forecasts made in previous Reuters surveys:

GDP CPI TRADE BALANCE

pct change pct change US$ bln

2008 2009 2008 2009 2008 2009 Sep 2008 5.0 4.9 6.5 4.0 0.5 -1.2 Jul 2008 5.0 4.9 7.0 3.8 -1.4 -0.5 Mar 2008 4.6 5.1 4.0 3.3 3.9 1.2 Dec 2007 4.8 N/A 3.0 N/A 9.0 N/A Sep 2007 4.8 N/A 2.7 N/A 4.7 N/A Jun 2007 5.0 N/A 2.7 N/A 3.9 N/A Mar 2007 4.7 N/A 3.0 N/A 3.9 N/A Historical data:

GDP CPI TRADE BALANCE

pct change pct change US$ bln 2003 7.1 1.8 3.8 2004 6.3 2.7 1.5 2005 4.6 4.5 -8.5 2006 5.1 4.7 1.0 2007 4.9 2.3 12.0 --------------------------------------------------------- 5-yr average 5.6 3.2 2.0

Forecasts for Thai baht exchange rate against the dollar:

Mid-2009 End-2009 Action Economics 35.0 35.0 Capital Nomura Securities 35.0 34.0 JP Morgan Chase 37.0 36.0 Kasikorn Bank 35.2 34.4 Phatra Securities 37.0 36.0 SCB Securities 35.3 35.0 SCRI 35.5 36.0 Stanchart 38.5 37.5 Tisco Securities 36.7 36.1 UBS 36.0 36.0 ----------------------------------------------------------- Median 35.75 36.0 ($1 = 35.55 baht)