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NEWS UPDATES 22-24 May 2010

Thailand: Growth seen at 4.5% amidst political risks

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Thailand's economy grew at a breakneck pace of 12 percent in the first quarter but civil unrest that erupted in March has clipped 1.5 percentage points from the 2010 forecast, according to Amphon Kittiamphon, secretary general of the Office of the National Economic and Social Development Board (NESDB).

“The Thai economy had the potential to grow 6 percent to 7 percent (in 2010) because private investment was continuing and confidence had been restored, but because of the protests and riots, the NESDB still maintains its growth forecast for the year of 3.5-4.5 percent,” the chief of the economic planning agency was quoted by news wires as saying Monday.

“I think that growth in the second quarter will still be positive due to exports which will balance lost tourism, but if the unrest continues the third quarter will be negative and the last quarter could be even worse,” he added.

“Tourist arrivals in the first quarter of the year registered at 4.7 million which is an unprecedented high. Room occupancy rates were 60.7 percent. Thailand could easily had achieved the 16 million target,” Amphon said. That full-year target has now been downgraded to 13 million arrivals.

Amphon said the economy recorded strong growth across all sectors in the three months to March. “It's not surprising that the first quarter of the Thai economy expanded at 12% because every engine of the economy - exports, consumption and private investment was working well.”

Anti-government protests which broke out in mid-March have left 86 killed and 1,900 injured. The “Red Shirts” movement was shut down in a military offensive on May 19 that triggered a rampage of arson and looting.

"Investors may be temporarily relieved that a semblance of normalcy has returned but the political risk remains high and investors will likely be cautious," said Warut Siwasariyanon, head of research at Finansia Syrus Securities in Bangkok.

"The big underlying conflict is still there and the wound is deeper than ever even as the roads have been wiped clean."

Thai stocks opened down 0.7 percent as trade resumed after being forced to close after a half-day session Wednesday when the stock exchange and other major buildings including Thailand's biggest shopping mall were torched.

The baht has dropped 0.6 percent in the past month and overseas investors dumped Thai shares on May 19 for an 11th day, the longest stretch of net sales since November 2008. The stock market was closed on May 20 and May 21.

Thailand has already seen consumer confidence drop to a nine-month low, leaving economic growth reliant on exports. The central bank forecasts that Southeast Asia’s largest economy after Indonesia may grow as much as 5.8 percent this year on overseas demand.

Thailand’s economic fundamentals remain “promising” if the government can quickly deal with the political unrest, bourse president Patareeya Benjapolchai said in an interview with Bloomberg Television on May 21. “Investors will come back.”


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