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NEWS UPDATES 21 May 2010

“Order restored in Bangkok, provinces,” says Thai PM

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Order has been restored in Bangkok and the provinces, wrecked by violence over the past week, Thailand's Prime Minister Abhisit Vejjajiva said Friday in a nationally broadcast television, stressing that the government will "move swiftly to restore normalcy," according to local and wire news reports.

“We have restored order in the capital of Bangkok and the provinces of Thailand,” adding that the government will continue with its reconciliation plan to build bridges with the Red Shirt protesters.

He says the reconciliation will include an indpenedent investigation of "all events" during the protests.

At least 83 people have been killed in political violence over the last two months. The crisis climaxed on Wednesday when the army overran a Red Shirt encampment in Bangkok.

Thailand’s economy probably expanded at the fastest pace in 14 years last quarter as exports rose, a recovery now endangered by a political impasse that’s shuttered sections of the nation’s capital and decimated tourism, according a report from Bloomberg news.

Gross domestic product rose 9 percent in the three months to March 31 from a year earlier, after growing 5.8 percent in the previous quarter, according to the median of nine estimates in a Bloomberg News survey ahead of the May 24 government report. That would be the highest reading since the third quarter of 1995.

Asian economies have benefited from an export rebound that’s helped lift growth from Singapore to Taiwan, an acceleration that may be slowed should Europe’s debt crisis hamper the global recovery. Thailand may be among the most vulnerable because its domestic demand is endangered by the nation’s worst political violence in 18 years.

“We have seen quite strong numbers this year from output to exports to consumption,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “However, from here on, we will definitely see negative impact from the political crisis on the economy. Thailand will lag behind its peers in the region.”

Rioting erupted across Bangkok on May 19 after Thai security forces backed by armored vehicles cleared an anti- government protest camp and forced its leaders to surrender. More than 30 buildings were set alight in Bangkok, a city of nine million people. One blaze substantially damaged the Stock Exchange of Thailand’s building.

The unrest may cause Thailand’s economy to contract this quarter compared with the previous three months, said economists including David Cohen of Action Economics and Pimonwan Mahujchariyawong of Kasikorn Research Co.

The government 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.

The Bank of Thailand last month kept the benchmark one-day bond repurchase rate unchanged at 1.25 percent, the lowest level since July 2004, saying it “views the heightened political risk as a key factor affecting confidence, tourism, private consumption and investment.”

Neighboring Malaysia has by contrast raised borrowing costs twice this year as its economy’s expansion accelerated. Thailand’s central bank will next meet to decide on the key rate on June 2.

The impact from the political turmoil on the economy “is going to weigh again on the central bank when they meet in June,” said Yougesh Khatri, a senior economist at Nomura Holdings Inc. in Singapore. “If the economy slows down given the situation, the central bank’s impetus to normalize interest rates lessen.”


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