4.7% Thai growth if uncertainty reduced: Unescap
In a new economic analysis of the aftermath of the military coup, the United Nations Economic and Social Commission for Asia and the Pacific (Unescap) predicts that Thailand's gross domestic product growth could reach 4.7 per cent in 2007 if the new interim government maintains political stability and reduces uncertainty in government spending, especially in infrastructure investments.
"In our best-case scenario, we expect public spending to increase under the new interim government and play a key role in boosting GDP growth," said Unescap executive-secretary Kim Hak-Su. "Thailand's macroeconomic fundamentals remain strong," said Kim. "We expect growth to be robust at 4.5 per cent this year. Exports are strong and inflation is falling. The relatively flexible exchange rate regime and high foreign exchange reserves have contributed to these good outcomes." In separate research, Ayudhya Securities predicted that the Bank of Thailand would revise upward its 2007 economic-growth projection, mainly because of the speeding up of the budget disbursement. It said while the disbursement was expected to start in June if Thailand had an elected government, the junta-appointed government would pave the way for disbursement starting in January. It added that lower oil prices as well as falling interest rates would further fuel economic growth. Unescap economists see no significant impact on the Thai economy from the September 19 coup d'etat, which toppled the Thaksin government. They note that the Thai stock market remains steady, the baht is stable and contagion to other regional markets is limited. Although Unescap's macroeconomic forecast remains favourable, uncertainty remains for the short-term outlook. Under a worst-case scenario of political instability, Unescap predicts that in 2007 growth could fall to 3.1 per cent, with inflation increasing to almost 10 per cent. The baht would depreciate by more than 20 per cent, reaching almost Bt46 per US dollar. "The next few months will be closely watched by investors," said Kim. "The interim government will have a heavy responsibility to maintain economic stability and investor confidence in the economy." "In the short-term, the new administration will need to outline policies regarding the investment climate, especially macroeconomic policies and economic governance measures." Kim said it would be very important for the government to clarify government spending, particularly on infrastructure.
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