Thailand’s Economic Projections for 2009 and 2010 (As of September 2009)

Stocks and Financial Services Press Releases Monday September 28, 2009 13:56
Bangkok--28 Sep--MOF

The Fiscal Policy Office (FPO), Ministry of Finance, announced that the Thai economy for 2009 is forecasted to contract at -3.0 percent per year. Despite the sharp contraction during the first half of the year, it is projected that the Thai economy would start to recover in the second half of 2009the year, and eventually show positive growth expand in the last quarter of the year. MThe major contributing factors attributing to Thailand’s this improvementeconomic recovery areis expandingthe public expenditures, especially from investment expenditures under the “Strong Thailand 2012 Khem Khaeng” programplan, along with the revival of major trading partners’ economiesy, particularly for Asian economies nations in particular. Nonetheless, the Thai economy still faces some the risks from slow recovery the slow recuperation of private expendituresdomestic spending in, both consumption and investment. On the other hand,For internal economic stability, is expected to improve, given that inflation is projected to decline tocontract by -0.8 percent per year, following declining oil prices which decreases significantly compared to last year as well as the tendencyappreciating trend of Thai stronger Baht. The projection of uUnemployment rate is projected to be has an improving trend of 1.8 percent of total labor force, as the re-employment situation improves rises following overall economic recovery the better expansion of the Thai economy in the second half of the year. As for external stability, cCurrent account in 2009 is projected to record a large surplus of 8.0 percent of GDP, as import value shrinks more than export value.

The Thai economy for 2010 is forecasted to expand at 3.3 percent per year (or within the range of 2.5 - 4.1 percent per year), given continuedwith the expansionary fiscal policy from latecontinuing from late 2009 particularly from public expenditures under the “Strong Thailand 2012Thai Khem Khaeng” programlan as the major drive, along withwell as the revival of private expenditures that would exhibit an improving trend from the low base in 2009. Meanwhile, export of goods and services in 2010 is forecasted to grow expand as the economiesy of Thailand’s major trading partners recovers. As for internal economic stability, inflation is projected to rise to 2.5 percent per year (or within the range of 2.0 - 3.0 percent per year), following increasing oil price compared to 2009. For external stability, current account in 2010 is projected to record a smaller surplus of 4.0 percent of GDP (or within the range of 3.7 - 4.6 percent of GDP), as the revival in domestic demand would lead tocause faster expansion of import value than export value. Details of the economic forecasts are as follows:

1. The Thai economy in 2009
1.1 Economic Growth

The Thai economy in 2009 is forecasted to contract by -3.0 percent per year. This is attributed to the sharp contraction of the economy in the first half of the year as a result of gGlobal economic crisis that causes a marked fall inadversely affected export volume of goods and services. Although the recovery trend of the global economy would haveplay a positive impactrole onto the export of goods and services in the second half of the year, export volume of goods and services in 2009 is still forecasted to contract considerably shrink at a high rate of -14.8 percent per year. Import volume of goods and services, on the other hand, is forecasted to decline by -22.2 percent per year following , decline in import demand for export-oriented productionas export and contraction in domestic demandspending subside. In particular, private investment is projected to contract by -13.7 percent per year, as investors s delay their investment plandecision following loweredthe drop in foreign and domestic purchase orders. Despite the improving tendency of domesticprivate consumption as a resulting from higher of better private income following an increasimprovinge in employment conditions and positive theimpact from the Government’s Stimulus Package 1 that helps to supporting income and reduceing household expenses, the sharp contraction in private spending particularly during the first half of the year would cause average private consumption in the year 2009 to shrink at the rate of -1.0 percent per year.

The major factor that would alleviate the contraction of the Thai economy when private spending does not yet fully recover is the accelerated disbursement of government public expenditures in accordance with the targetto reach the target. In particular, the timelyquick and effective implementation of the “Strong Thailand 2012Thai Khem Khaeng” program lan is crucial in has to continually help drivinsupporting the Thai economy during the remaining period of the year. In this connection, public Government consumption growth in 2009 is projected to accelerate to 6.4 percent per year, while public investment growth is projected to increase to 5.3 percent per year.

1.2 Economic Stability

Internal economic stability is expected to improve, with headline inflation in 2009 forecasted to fall todecline to -0.8 percent per year. This is due to the falling lowered crude oil price, which is expected to deeply drop from 2008 level, along with the appreciating Thai Baht. Core inflation, which excludes energy and raw food prices, is projected to fall tobe 0.4 percent per year, partly due to the continuation extension of the Government’s measures that help lowering cost of living. Unemployment rate has is expected to be an improving trend of 1.8 percent of total labor force, as the re-employment conditions is expected to improve given rises following the betterbetter expansion of the Thai economy in the second half of the year. As for external stability, current account in 2009 is projected to record a large surplus of 8.0 percent of GDP , asdue mainly to expected large trade balance reaches the high surplus of 20.5 billion USD from . This large surplus is due to the greater decline fall in import value relative to export value. Import value is forecasted to contract from the high base of last year at -28.8 percent per year, while export value is projected to decline at -17.2 percent per year.

2. The Thai economy in 2010
2.1 Economic Growth

The Thai economy for 2010 is forecasted to expand at 3.3 percent per year (or within the range of 2.5 - 4.1 percent per year), withsupported by continued the governmentpublic spending under the fiscal deficit framework at 3.5 percent of GDP as the major drive, along with the publicGovernment investment expenditures under the “Strong Thailand 2012Thai Khem Khaeng” program. lan. Public investment is thus forecasted to accelerate to 8.2 percent per year (or within the range of 5.2 – 11.3 percent per year), while public consumption in 2010 is projected to expand at the rate of 4.8 percent per year (or within the range of 4.0 – 5.7 percent per year.) In addition, the recovery of private expenditures that has an improving trend from the low base in 2009 would play a support Thailand’s economic expansioning role. In this connection, pPrivate consumption is forecasted to grow at 4.2 percent per year (or within the range of 3.7 – 4.7 percent per year), as household incomes increase recuperates following the recovered economic revivaly, coupled with the employment conditions and work hours that would returning tosume the normal level. Private investment in 2010 is projected to expand from the low base in 2009 to grow at 6.6 percent per year (or within the range of 2.7 – 9.0 percent per year), partly due toas the public investment under the “Thai Khem KhaengStrong Thailand 2012” program that lan would lead to cause the Ccrowdinging-in effect for private investment. Meanwhile, export of goods and services in 2010 is forecasted to grow at 5.6 percent per year (or within the range of 4.8 – 6.7 percent per year), as the economiesy of major trading partners recover as well as improving from s, along with the low base of last year. The growth of import volume of goods and services is projected to accelerate to 12.4 percent per year (or within the range of 10.6 – 14.2 percent per year), as a result of the recovery of domestic spending and the rise in export. export recovery.

2.2 Economic Stability

OnIn terms of internal economic stability, headline inflation in 2010 is projected to increase rise to 2.5 percent per year (or within the range of 2.0 – 3.0 percent per year), as the global oil and agricultural prices are expected to rise following in line with the recovery of the global economy. Unemployment rate is expected to further decline to resume its normal level at 1.3 percent of total labor force (or within the range of 1.0 – 1.5 percent of total labor force.). As for external stability, current account is projected to decline from previous yearfall, but yet still record a surplus of 4.0 percent of GDP (or within the range of 3.7 – 4.6 percent of GDP.). This is due to lower the fall in trade surplus to 9.7 billion USD (or within the range of 8.7 – 11.1 billion USD), as the value of import grows at the faster pace than export value. Export value is projected to grow at 10.0 percent per year (or within the range of 9.0 – 11.4 percent per year) following the revival of the global economy. Import value is forecasted to grow at 19.5 percent per year (or within the range of 17.0 – 21.9 percent per year), as domestic demand picksspeeds up and import order for export-oriented manufacturing rises.


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