Country Report Thailand

Outlook for 2008-09

• Thailand’s political scene remains unpredictable, and speculation about the possibility of another military coup has intensified following renewed anti-government street protests by the People's Alliance for Democracy (PAD).
• Continuing to heighten the sense of political turmoil is uncertainty over the future of Thaksin Shinawatra, who was ousted as prime minister in the September 2006 coup.
• The People Power Party-led coalition government will push through an expansionary fiscal policy agenda, including a host of populist policies, many of which were introduced during the Thaksin era.
• Despite ongoing concerns over political stability, the recent formation of a democratically elected government has provided grounds for an increase in confidence, thus stimulating private consumption and investment.
• Consumer price inflation will accelerate to an average of 7.2% in 2008, reflecting soaring food and fuel prices. Inflation will ease back down to 4.5% in 2009, in line with softer world non-oil commodity prices.
• The pace of export revenue growth will slow in the forecast period as the US economy goes into recession in 2008 and recovers only weakly in 2009. As import demand strengthens, the current-account position will deteriorate.

Monthly review

• The PAD, which co-ordinated mass anti-Thaksin protests in 2006, has taken to the streets to demonstrate against the current government, and has succeeded in thwarting the PPP's plans to amend the 2007 constitution.
• Adding to the government's woes, a minister in the Prime Minister's Office, Jakrapob Penkair, was forced to resign in late May after being charged with lese-majesty.
• The government has come under intense pressure to contain inflation and tackle the recent rapid increase in the cost of living, while the Bank of Thailand (the central bank) has again kept its policy interest rate unchanged.
• Thailand's economy picked up momentum in the first quarter of 2008, with real GDP growth hitting 6% year on year.
• Although the momentum of economic growth was maintained in the first quarter of 2008, there are serious concerns over economic instability, given that year-on-year inflation reached 7.6% in May.
• Compounding general concerns about the state of the economy, in April the current account plunged deeply into deficit, primarily owing to the large deficit recorded on merchandise trade in that month.

SOURCE: Country Report