ADB forecast brightens

       The Thai economy is expected grow by 3% next year in line with higher public spending and an improved global economy, compared with a contraction of 3.2% this year, according to the Asian Development Bank.
       The ADB cut its forecast for 2009 from an earlier estimate of a 2% contraction, citing the worse-than-expected global downturn in the first half and domestic political unrest.
       But growth forecasts for Asia were increased for 2009 and 2010, with the ADB saying that the region had proved to be more resilient to the global recession than previously thought.
       Asia is expected to see a "V-shaped"recovery, Thailand included, though its recovery would be slower than in other countries in the region, the ADB said. Developing Asian economies are projected to post growth of 3.9% this year, compared with a 3.4% growth projection made in March.
       For 2010, developing Asian economies should post average growth of 6.4%, up from previous forecasts of 6%,helped by fiscal and monetary stimulus provided by governments and central banks, healthy financial systems prior to the crisis, and a rapid turnaround in larger regional economies.
       Jean-Pierre Verbiest, country director of the ADB's Thailand office, said the Thai economy should pick up slightly in the fourth quarter.
       "We have to be careful when looking at economic figures during the abnormal economic times," he said.
       "All institutions have the same view that the economy will grow in the last quarter this year, but very slightly, considering that last year the economy shrunk considerably."
       Mr Verbiest said Thailand's consumption and private investment will improve if there is no disruption in government stimulus programmes and people have confidence in state policy and projects.
       The government's second stimulus programme, known as "Thailand:Investing from Strength to Strength"or Thai Kem Kaeng , will commit 1.45 trillion baht through 2012. Authorities expect the programme, equal to 5% of GDP, to create 1.5 million jobs, stimulating private consumption and a recovery in industries such as metal, cement and construction materials.
       Mr Verbiest said that to avoid asset bubbles, policymakers needed to keep a close watch on monetary policy and interest rates, which have been reduced to very low levels in many countries.
       While this should not be a problem for Thailand, it was a concern for countries such as China or Indonesia.The Bank of Thailand's policy rate, now at 1.25%, has likely bottomed out.
       Mr Verbiest said the Thai government also needed to ensure that fiscal stimulus was carried out prudently and efficiently given the rise in debt.
       Public debt is expected to peak at 58% of GDP by 2012, a manageable level considering the country's strong financial status. The ADB said authorities needed to manage future financing needs closely, and avoid a concentration in bond maturity periods to minimise the impact on future budgets.
       Mr Verbiest cautioned that if the global economy recovers more slowly than expected, it could affect exportreliant Asian economies."You have to have better balance toward domestic demand to reduce over-reliance on external markets," he said.
       Mr Verbiest noted that Indonesia,which is projected to post GDP growth of 4.3% this year, depends on exports for only 20% to 25% of its economy,compared with 70% for Thailand.
       Thailand should take advantage of its geography as it is well positioned between China and India whose markets are predicted to drive world's economic growth in the future, he added.
       The ADB is in talks with the Thai government to lend $500 million to support spending programmes for fiscal 2010. It has approved a $77.1-million loan for a highway construction programme connecting Thailand to the Greater Mekong River region.
       Charl Kengchon, senior economist and managing director at Kasikorn Research Center, agreed Thailand would lag the region in economic recovery.
       "Economic growth in Thailand next year would be among the slowest in the Asian region," Dr Charl said."We expect to see about 2.5-3.5% growth [in 2010], which is not too good when compared with 5% growth predicted for Singapore or Indonesia."
       Kasikorn Research Center maintains a forecast for an economic contraction of 3.5% to 4.1% for 2009.
       Thailand's major risk, Dr Charl said,remains political uncertainties, a factor that is unique when compared with other regional countries.
       "The Thai Kem Kaeng project will be a test for the government. Businesses are watching to see how well the government can weather through the political storm and whether it is able to fully implement the stimulus programmes," he said.
       "If the government is able to deliver,it will help to establish strong confidence among the private sector and stimulate spending."