Country Report Thailand April 2009

Summary

The political scene will remain unstable. Given the serious political and economic challenges facing Thailand, the prime minister, Abhisit Vejjajiva, will have done well if his government is still in office in early 2010.
As the economy endures its first recession in more than a decade, opposition protesters, led by the United Front for Democracy Against Dictatorship (UDD), will exploit increased economic hardship to discredit the government.
Fiscal policy will remain expansionary, while the Bank of Thailand (BOT, the central bank) will maintain a loose monetary policy in an attempt to revive domestic economic activity.
The economy will shrink by 4.4% in 2009the first contraction since the 1997-98 Asian financial crisis. Growth will resume in 2010, with real GDP expanding by 1.4%.
In line with the forecast economic contraction in 2009 and falling global prices for crude oil and non-oil commodities, the Economist Intelligence Unit expects Thailand to experience mild deflation this year.
The current account will move into surplus in 2009-10 as merchandise imports collapse owing to the downturn in domestic consumption and investment.

Abhisit has survived a no-confidence vote in the House of Representatives (the lower house). In the vote on March 31st he secured 246 votes from the 449 sitting members of parliament.
On March 26th around 30,000 UDD supporters again rallied outside the site of the prime ministers offices, Government House, demanding that Abhisit step down.
In late March the finance minister, Korn Chatikavanij, said that the economy would contract by 2-3% in 2009the first official admission that the economy will shrink.
Abhisit has presided over a ceremony marking the issue of Save the Nation? cheques. The government plans to hand out the Bt2,000 (US$57) cheques to around 9m people as part of its fiscal stimulus.
In January manufacturing output fell by 21.3% year on year, according to the BOT. Reflecting the drop in production, the industrial capacity utilisation rate fell to 57.1%, the lowest rate in over ten years.
In February merchandise exports fell by 11.3% year on year, according to provisional Ministry of Commerce figures. Imports were down by 40.3%.