StanChart cuts GDP number

"Although Thailand has diversified its export markets to many countries it will still be hurt by the world economic slowdown," Usara Wilaipich, the senior economist at the bank, said yesterday.

Given that exports, the country's main economic engine for decades, will decelerate and consumption and investment will remain weak, the government needs to play a more proactive role in stimulating the economy through mega-infrastructure investment, she said.

The country's economy, exports in particular, will feel the pinch from the global economic slowdown by next year, she said.

The export growth rate will be at a single digit because the economies of the US, Europe and Japan, which represent one-third of Thai export value, will lose steam, she said. If China, Hong Kong and Singapore are also taken into account, exports to these countries account for over 60 per cent of the total, she said.

The gross domestic products of Europe and Japan shrank in the second quarter and if they still shrivel in the third quarter, those markets will fall into technical recession, she said.

The bank also predicts that Thailand's GDP will expand by 4.7 per cent this year. It forecasts that China's economy will cool off.

The central bank of China, in a first move in the region, recently slashed its policy rate following a long-running tight policy. This reflects China's concern about its economic development in the future after the US and Europe experienced tough times.

A cut in the Bank of Thailand's policy rate from 3.75 per cent to 3 per cent is possible because the need to boost economic growth has increased and inflation next year is expected to ease to 2.5 per cent from the 6.4 per cent expected this year.

Prasarn Trairatvorakul, president of Kasikornbank, also believes that export growth could likely sink into the single digits next year due to the erosion of purchasing power of the Kingdom's main trading partners, including the US. Further, the US economy might enter into a recession in the third quarter, prompting the Federal Reserve to trim its interest rate.