Country Report Thailand December 2008

Outlook for 2009-10

• Thailands political scene will remain volatile owing to the escalating confrontation between the prime minister, Somchai Wongsawat, and his opponents, led by the Peoples Alliance for Democracy (PAD).
• The use of force to disperse PAD protestors from the main international airport in the capital, Bangkok, appears to be the only option still open to the government. Serious violence could lead to intervention by the army.
• Resolving the political crisis will require a solution to the power struggle between the royalist bureaucratic elite and the urban middle class on one side and supporters of Thaksin Shinawatra and the rural masses on the other.
• Thailand's economic growth will slow to 1.9% in 2009, from an estimated expansion of 4% in 2008. Growth will remain weak in 2010, when GDP will expand by 2.8%, according to Economist Intelligence Unit forecasts.
• The Bank of Thailand (BOT, the central bank) will cut interest rates when its policy committee next meets on December 3rd. The BOT will continue to loosen its policy stance in 2009.
• The governments fiscal policy will remain expansionary in 2009, but the government will be wary of substantially increasing its external borrowing requirement while global credit conditions remain tight.

Monthly review

• Thailand's political crisis has escalated. On November 25th the PAD occupied Bangkok's international airport, forcing the cancellation of all flights, after announcing a final battle? to oust the government.
• The army's commander in chief, Anupong Paojinda, has called on Somchai to resign, but the prime minister has said that he will not be forced from office.
• The government is considering fiscal measures to support the economy. In November the finance minister, Suchart Thadathamrongvech, said that he was considering lowering personal and corporate income taxes.
• The Board of Investment (a state agency that offers promotional privileges for investors) has announced new incentive packages, and is also preparing for an organisational revamp.
• Economic growth slowed in the third quarter of 2008, falling to 4% year on year, from 5.3% in the second quarter. However, in the first nine months of the year growth averaged 5.1%, up from 4.6% in the year-earlier period.
• Thailand's automotive industry is facing severe pressures. In November GM Thailand said that it would close its plant in Rayong, while Toyota Motor Thailand has said that it will reduce production by 30%.

Source: Country Report

This report covers the following industry codes:
SIC Code: 47;49;37;60
NAICS Code: 48;22;336;52