TCS Daily


Will Thai Tiger Roar Again?

By Manjusha Pandey - September 14, 2004 12:00 AM

Thailand, Southeast Asia's second most powerful economy after Singapore, has started to show signs of weakness amid rising oil prices, constant outbreaks of bird flu virus and ongoing violence in the southern part of the country. Most analysts are expecting the economy to cool.

Thailand, which registered a GDP growth of 6.8 percent in 2003, experienced the second highest economic growth seen in any country globally in 2003 after China. Thai authorities had anticipated 2004 GDP growth to be around 8 percent, a target that was set by Prime Minister Thaksin Shinawatra for this year, and 10 percent for next year.

The prime minister's aim was to double Thailand's GDP within the next five years. But he has stated to tame his projections down. "We are hopeful that we will at least register 6.5 percent GDP growth this year," he said over the weekend.

The government think-tank, the National Economic & Social Development Board (NESDB), cut the 2004 GDP growth forecast by a half a percentage point to 6.5 percent, a move similar to that of the Ministry of Finance which had trimmed the GDP forecast just a few days ago. The Ministry of Finance cut its forecast to 6.5-7.0 percent from 7.7-8.1 percent.

Some other analysts are even more pessimistic. "Even these (revised numbers) look subject to more downside than upside risk as the factors slowing domestic demand in the first half of 2004 - bird flu, oil prices, terrorism, political uncertainty - look set to remain in place in second half of this year. We are revising our full year forecast to 6.0 percent from 6.5 percent and expect the consensus (6.7 percent in August) to be doing the same," said Tim Condon, economist at Macquarie Securities in Singapore.

"Everyone is revising GDP growth lower, a remarkable change from a year ago. And we do not believe the downgrades have finished," he said.

Supavud Saicheua, economist at Phatra Securities says that even the 6 percent targets set by the various state-owned agencies and the government would likely be difficult to achieve given that the global economy is likely to slowdown by the end of this year and next year.

He was not alone in voicing these views. Michael Spencer, chief economist at Deutsche Bank based in Hong Kong said that one of the key drivers of the economic growth -- domestic consumer spending -- has shown a remarkable slowdown which could impact the economic growth.

"We look for a slowdown in year-on-year growth to about 5.7 percent and a further slowdown in the fourth quarter. We expect annual average growth this year of 5.7 percent, a mild reduction compared with our previous forecast (the government's forecast has been cut to 6.5 percent, implying an acceleration of growth in the second half of the year). For next year, we expect growth of 4.5 percent - 5.0 percent."

Economists who were among the most optimistic on Thailand's growth prospects have also taken a step back and revised their projections for growth.

"We have revised down our 2004 real GDP forecast from 7 percent to 6.2 percent after weak growth in the first half of the year. However, the cyclical upturn has not been derailed and we expect growth to pick up over the coming quarters as expending bank credit provides a fresh boost to the investment upswing," said Tony Nafte, economist at CLSA Securities.

Still, a handful of economists continues to remain optimistic. Daniel Lian of Morgan Stanley, who has a 6.6 percent GDP growth target set for this year, is optimistic that public investments would start to play a role in the economy. He says that increase in private investment could also help spur the growth during the remainder of the year despite the rising price of oil globally.

"Amidst weakening business sentiment, a slowdown in construction and equipment resulted in private investment rising a slower, but still strong, 12.1 percent year-on-year," he said.

The author is a writer living in Bangkok.


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