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March 24, 2009

Thai economy seen shrinking 3% in 2009

Thailand's economy may shrink by 3 percent this year despite government stimulus measures to limit the impact of a global economic slowdown, Reuters quoted Finance Minister Korn Chatikavanij as saying Monday.

"The contraction of 3 percent this year has already taken into account the economic measures," Korn told reporters ahead of the Finance Ministry's latest forecasts due on Wednesday.

Last December, the ministry expected the export-driven economy to grow by 0-2 percent in 2009, but shipments of electronics, auto parts and other goods have plunged due to falling demand in the worst global downturn in decades.

The latest Reuters poll on March 18 forecast a contraction of 1.5 percent in 2009 and growth of 2.9 percent in 2010.

Korn, who will seek parliament's approval on Tuesday to begin negotiating a $2 billion loan from international agencies to help finance the stimulus measures, said an 8-9 percent contraction was possible if the government did nothing.

"When the situation changes and the economic outlook is weaker, the government is not reluctant to tell the truth," said the Oxford graduate and former chief of JP Morgan in Thailand.

The economy shrank 6.1 percent in the fourth quarter from the previous quarter, the biggest contraction in memory, as exports nosedived and political unrest hit consumer confidence.

Commerce Minister Porntiva Nakasai said on Monday she was still hoping for export growth of 0-3 percent this year, after 15.6 percent growth in 2008.

"Our target of 0-3 percent is not a day dream," Porntiva told reporters, promising new unspecified measures in the second quarter to turn exports around in the third quarter.

Exports, equivalent to 60 percent of gross domestic each year, fell 11.3 percent in February after a 26.5 percent fall in January, according to the Commerce Ministry.

In its last round of forecasts in February, Thailand's state planning agency, the NESDB, expected exports to shrink more than 13 percent this year.

The agency also projected zero economic growth at best and a possible contraction of up to 1 percent, the lowest in a decade, after 2.6 percent growth last year.

Like other governments around the world, Thailand has launched a package of stimulus measures, including tax breaks, cash handouts, cheap utilities and transport, in a bid to ward off a recession most analysts expect later this year.

The government also plans to spend 1.4 trillion baht ($40 billion) on infrastructure projects over the next 3 years to help the economy. Details of that plan are due to discussed by economic ministers on Wednesday.

Prime Minister Abhisit Vejjajiva repeated on Sunday that his government planned to borrow $2 billion from international agencies to help support the economy.

Korn will seek parliament's approval on Tuesday to begin talks on the 7-10 year loans -- which include $1 billion from the World Bank and $500 million each from the Asian Development Bank and Japan International Cooperation Agency.

The final terms would have to be approved by cabinet and parliament. The government has said it expected to receive the loans in the third quarter of this year.
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