Country Report Thailand June 2009

Outlook for 2009-10

• The political scene will remain unstable in 2009-10, as there is unlikely to be any resolution to the countrys protracted, multi-faceted power struggle.
• As well as contending with opposition groups, the prime minister, Abhisit Vejjajiva, may struggle to retain the support of his partners in the coalition government. A fresh election could be held within the next year or so.
• The government will try to support economic growth through an expansionary fiscal policy. However, it will face constraints, owing to falling revenue in 2009. Monetary policy will remain accommodative.
• The economy will shrink by 4.5% in 2009the first contraction since the 1997-98 Asian financial crisis. Growth will resume in 2010, with real GDP expanding by 1.9%.
• 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 record a large surplus in 2009 as merchandise imports collapse, owing to the downturn in consumption and investment. The current account will remain in surplus in 2010, albeit at a far lower level.

Monthly review

• Abhisit has been careful not to rule out dissolving parliament and calling fresh elections, but he has made it clear that he will not go to the polls until the political temperature has cooled.
• The political reconciliation effort that has got under way in the past month is being driven by a parliamentary committee that is studying options for political reform and constitutional change.
• The domestic political crisis has weighed heavily on Thailands reputation, particularly in diplomatic circles. In mid-May the government was again forced to postpone plans to hold a regional leadership summit.
• The economic downturn has had a severely negative impact on the governments finances, and the Abhisit administration has been facing difficulties in trying to push through its fiscal agenda.
• After a rapid loosening of its monetary policy stance since late 2008 in an effort to stimulate the economy, the Bank of Thailand (the central bank) decided in May to keep its policy interest rate unchanged at 1.25%.
• Thailands economy has deteriorated rapidly. On a year-on-year basis, the economy plummeted by 7.1% in the first quarter, following a contraction of 4.2% in the fourth quarter.

This report covers the following industry codes:
SIC Code: 60;15;39
NAICS Code: 52;23;31