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Published on April 3, 2008

The Thai economy will grow 5 per cent and 5.2 per cent this year and next year respectively, up from 4.8 per cent last year, according to its report yesterday.

Thailand will achieve more balanced growth by reviving domestic demand, offsetting an easing in exports.

A stronger local economy should offset adverse effects from an expected global slowdown, said Jean-Pierre Verbiest, ADB's country director for Thailand.

Populist policies and public investments in large infrastructure projects would also help boost domestic demand, he noted.

"However, if the government fails to implement them, local growth will not pick up," he warned

A diversification in local exports should also prevent a sharp slowdown, the report said.

Solid growth among neighbouring countries should also support purchase orders for Thai exports, he said.

India will grow 8 per cent and 8.5 per cent this year and next year, respectively, slightly lower than 8.7 per cent last year.

China is expected to have a "soft landing", growing 10 per cent and 9.8 per cent this year and next year, dropping a bit from 11.4 per cent last year.

Thai exporters are more adaptable when compared with their counterparts in other regional nations as Thais are more able to expand to new markets.

By doing so, Thailand can depend much less on traditional markets such as the United States, Europe and Japan, to balance the economy, he said.

Thailand also faces a much lower impact from the US sub-prime crisis because it has little exposure in such instruments.

But the country's growth is still performing well below its potential, he said.

Thailand should be growing as fast as Malaysia, he said, but it has lagged behind for many years.

The ADB projected that Malaysia would grow 5.4 and 5.9 per cent in 2008 and 2009 respectively, down from 6.3 per cent last year.

Vietnam, the region's rising star, will expand 7 per cent and 8.1 per cent in the same period, down from 8.5 per cent last year.

Rising food and fuel prices have pushed up inflation sharply in developing Asian countries.

"A rise in the price of rice should benefit Thai farmers [over the long run]. But at the same time, it will have a negative impact on lower income groups," he said.

The Thai inflation rate is expected at about 4 per cent this year.

Other countries such as Vietnam are facing a much higher rate of about 18 per cent this year.

The development challenge for Thailand in the short term is in finding ways to rebuild confidence among local and foreign investors, he said.

Wichit Chaitrong

The Nation