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 30 Apr 2009

Thai ministry sees signs of economy bottoming out

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Thailand's economy may have hit bottom in the first quarter of 2009, with some recovery seen in exports in particular, Reuters quoted a Finance Ministry official as saying Wednesday.

Still Prime Minister Abhisit Vejjajiva said the cabinet would examine new economic measures and sources of funding next Wednesday as the government plans to spend 1.56 trillion baht ($44 billion) over the next three years, largely on infrastructure projects, to help revive the economy.

Analysts were sceptical about the notion of even a tentative turnaround, given the global economic crisis, political violence in Thailand this month and now the worries about a flu pandemic.

But Finance Ministry spokesman Ekniti Nitithanprapas cited signs of a recovery in exports in segments such as agricultural products and electrical appliances shipped to China, Australia and countries in Africa and the Middle East.

"Economic figures have started to improve in March, therefore the economy should have hit bottom in Q1," he told a news conference.

He said the economy in the first quarter would shrink from a year earlier more than the 4.3 percent contraction recorded for the fourth quarter of 2008. He didn't give any specifics.

Bank of Thailand data has shown industrial output slumped around 20 percent in both January and February from a year. Analysts in a Reuters poll said central bank data on Thursday would show it fell 19 percent in March.

Exports fell 25 percent in January and then 11 percent in February. But the poll suggests the exports fall steepened in March to 23 percent.

Imports have been falling even faster at 36.5 percent in January and 43.5 percent in February. They are seen down 35.7 percent in March.

"Given the enormous risks to growth that are likely to ensue following the political protests, we see plenty of scope for a bottom much further away than Q1, especially if the global economy enters a U-shaped recovery," said Forecast economist Carl Rajoo in Singapore.

Seeing "less bad" economic numbers did not signify the economy had bottomed out, he added.

Ekniti said exports to China dropped 14 percent in March from a year earlier after a fall of nearly 29 percent in February, while shipments to the Middle East rose 3.3 percent in March and exports to Africa grew 17.6 percent.

Even so, Commerce Ministry data on April 21 showed overall exports in March still fell 23.1 percent from a year earlier, more than double the pace of the 11.3 percent drop in February.

Ekniti said the improvement in exports helped increase factory capacity utilisation and would help employment.

He said the unemployment rate had fallen to 1.9 percent in February, or 714,000 people, from 2.4 percent in January. The central bank has said 878,900 people were unemployed in January.

Such a drop in unemployment seems surprising given the big falls in industrial output.

The Thai Chamber of Commerce University forecast last week that the economy could shrink 4.3 percent this year -- more if the political situation did not improve by the end of the third quarter -- and said unemployment would be at least 1.3 million if that happened.

Abhisit said last week the economy could contract as much as 5 percent this year after anti-government protests hurt business confidence and tourism.

However, he said on Wednesday some indicators had improved, noting fewer redundancies in March than a month earlier, as the government was trying to fix the economy, although exports and imports still faced a tough time.

"The government is not complacent and has asked every agency to keep an eye on economic data in April," he said, without elaborating. The government would look at new measures of support next week, he said.



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