Country Report Thailand March 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 enters recession, opposition protesters, led by the United Front for Democracy Against Dictatorship, will exploit increased economic hardship in an attempt to discredit the government and its policies.
Fiscal policy will remain expansionary, while the Bank of Thailand (BOT, the central bank) will loosen monetary policy further in an attempt to revive domestic economic activity.
Thailand's 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 1.8%.
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 will experience mild deflation this year.
The baht, which has depreciated by about 4% against US dollar so far this year, will remain on a downward trend owing to heightened risk aversion.

On February 24th an estimated 15,000 anti-government protesters gathered outside Government House in the capital, Bangkok. However, the protesters did not prevent the prime minister from entering his offices.
The parliamentary opposition, led by Puea Thai, a party closely aligned with a former prime minister, Thaksin Shinawatra, plans to file a censure motion against leading government ministers, including Abhisit himself.
In February parliament approved the government's Bt116.7bn (US$3.3bn) mid-year budget, a major component of which is a plan to give a one-off direct cash grant of Bt2,000 (US$57) to poorer households.
In February the BOT cut its main interest rate, the one-day repo rate, by 50 basis points to 1.5%, the lowest level since mid-2004.
Thailands economy shrank for the first time in a decade in the fourth quarter of 2008, with real GDP contracting by 4.3% year on year. On a seasonally adjusted quarter-on-quarter basis, the economy contracted by 6.1%.
According to the Department of Labour Protection and Welfare, in the first five weeks of 2009 a total of 110 registered firms ceased operations, resulting in around 12,500 workers losing their jobs.

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