Thailand's regional economies all show a slowing-down trend resulting from the strengthening baht, a drop in investment and political uncertainty, particularly in the deep South, the latest survey by the University of the Thai Chamber of Commerce (UTCC) indicates.

The survey also forecast that the Kingdom's overall economy would turn to a worst-case scenario of economic growth falling below 4 per cent.

Predictions concerning the country's economic prospects were based on four negative factors. These were a drop in consumer confidence to its lowest level in five years, a fall in sales value in key industries and even losses in some sectors, effects of the baht's appreciation on export value towards the second quarter and unclear government spending policy.

Thanawat Polvichai, director of the university's Economic and Business Forecasting Centre, said UTCC insisted the overall economy this year would grow 4-4.5 per cent, less than last year's 5 per cent. That prediction is based on an exchange rate of Bt35 to Bt35.50 to the US dollar.

To ensure economic growth in each region, Thanawat suggested the government manage a weak but more stable baht, stimulate budget disbursement, solve drought problems and impose strict control over bird-flu outbreaks.

A joint study by UTCC and the Comptroller-General's Department showed the economy in Bangkok and the surrounding area would grow 4.24 per cent this year, down from 4.8 per cent last year. The central region is expected to grow 5.27 per cent, from 5.79 per cent last year; the South 4.05 per cent, from 4.53 per cent; the North 4.2 per cent, from 4.81 per cent; and the Northeast 4.03 per cent, from 4.1 per cent.

At 44.1 per cent, Bangkok and the surrounding area accounted for the highest proportion of the Kingdom's total gross regional product (GRP). This was followed by the central region at 29.1 per cent, the Northeast at 9.8 per cent, the South at 8.6 per cent and the North at 8.4 per cent.

In the South, the overall economy is forecast to continue average growth, but problems with the insurgency in the southernmost provinces of Pattani, Yala and Narathiwat will directly hit regional economic growth. The violence in the South has affected not only consumption, but also investor confidence.

The economy in the South should return to normal in the third quarter, unless more widespread violence occurs in the region.

The study showed Songkhla, Pattani, Yala and Narathiwat drove 35 per cent of the economic growth in the South.

However, certain positive factors could boost the country's economy. These include inflation rates decreasing, oil prices stabilising at US$60 to $65 (Bt2131 to Bt2309) per barrel, interest rates falling 0.75-1 per cent, prices of agricultural goods rising and tourists numbers increasing, particularly on the Andaman Coast in the aftermath of the tsunami.

Petchanet Pratruangkrai

The Nation