Country Report Thailand May 2009

Outlook for 2009-10

• The political scene will remain unstable in 2009-10. The Songkran protests in mid-April have underlined the extent to which the prime minister, Abhisit Vejjajiva, relies on the patronage of the established elites to remain in power.
• As well as contending with opposition groups, Abhisit must also retain the support of his patrons in the royal palace, military and bureaucracy, which will prove difficult as he attempts to reconcile a divided nation.
• As the economy endures its first recession in more than a decade, opposition protestors, led by the United Front for Democracy Against Dictatorship, will exploit increased economic hardship to discredit the government.
• 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 1.1%.
• 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.

Monthly review

• On April 12th Abhisit declared a state of emergency in the capital, Bangkok. At least two people were killed and more than 100 others were injured as soldiers dispersed protestors.
• In late April the finance minister, Korn Chatikavanij, said that the economy could contract by as much as 5% this year, putting further pressure on the governments fiscal position.
• The cabinet has approved an additional Bt94bn (US$2.6bn) in borrowing for fiscal year 2008/09 (October-September). As a result, total outstanding debt is expected to rise to around 44% of GDP, according to official figures.
• The Bank of Thailand (BOT, the central bank) has cut its main interest rate, the one-day repo rate, by 25 basis points to 1.25%, the lowest level since July 2004.
• Manufacturing production fell by 19.8% year on year in February, according to the BOTs manufacturing production index. Production of electronic products contracted by 23.3% year on year.
• In March merchandise export revenue fell by an estimated 23.1% year on year to US$11.6bn. As a result, export revenue for the first quarter came to US$33.8bn, a year-on-year decline of 20.6%.

This report covers the following industry codes:
SIC Code: 60;39;70
NAICS Code: 52;31;72