Global downturn to stretch into 2009: Supachai

The global economic downturn will continue next year due to financial crises, rising farm-goods prices and falling oil prices, UN Conference on Trade and Development director-general Supachai Panitchpakdi said yesterday.

"I cannot predict how long the economy will keep slowing in the face of the financial meltdown, but this is one of the worst crises in a century," he said, adding that the US economy would also continue to drop next year.

Supachai was speaking yesterday in Bangkok on the topic of "Opportunities and Challenges for Thailand: A Global Prospective" on the second day of "Thailand Focus 2008". Supachai said world economic growth was expected to drop by more than one percentage point next year, more than the normal annual average decline when there is a downturn, due to continued problems in developed nations. This will directly hit the Asian economy.

He suggested the international community set up a financial institute to coordinate inspection systems and provide transparent information for all involved, in order to help prevent a financial meltdown. Supachai said the global slowdown would also affect Asia exports, including those of Thailand, one-third of whose economy relies on exports.

To ensure sustainable growth in both exports and the economy, he suggested Thailand take the opportunity to develop its agricultural sector, because it was the most likely to increase revenue for the Kingdom. He said Thailand should develop its farm sector in light of continuously rising commodity-goods prices. To do this, the country must reduce production costs and invest more in agricultural production, in order to serve rising demand for food in the world market.

He also warned Thailand of exchange-rate volatility and current-account problems from overuse of fossil fuels, as the oil price might increase again next year.

"The government should beware of cutting fuel taxes to bring down consumption, as that would increase demand for imported oil, which would in turn result in a current-account deficit for the Kingdom," said Supachai.

To reduce demand for imported oil, he said Thailand should rely more on alternative energy and reduce demand for fossil fuels.

Meanwhile, Supachai said the new finance minister must carefully manage monetary and fiscal policy, in order to ensure continued economic growth. He declined to comment on who should be the next finance minister but did say whoever it was must work for economic and not political ends. -