Thailand could technically escape recession: BOT

Senior director Amara Sriphayak said the yearonyear economy in the first quarter would possibly be worse than it was in the fourth quarter, which is expected to be minus 0.52 per cent year on year. This is the result of a highbase effect, with the economy in last year's first quarter growing 6 per cent.

She said the economy in the fourth quarter would show a 3percent contraction from the third quarter but that it would expand in the first quarter compared with the fourth quarter.

That would mean the Kingdom would not register a quarteronquarter economic contraction for two consecutive quarters, which is how a technical recession is defined.

The baseline projection was based on the assumption that government disbursement would be 94 per cent and that private consumption and investment would pick up. It was also encouraged by easing monetary policy and low inflation.

"But the global economy is a risk factor that could worsen the economy in the first quarter," said Amara.

The Bank of Thailand has already taken into account in its worstcase scenario that the world's economy will fall 0.5 per cent this year, as recently revised by the International Monetary Fund.

The economic slowdown in the fourth quarter was caused by the global recession and political instability, which dampened tourism, private consumption and investment. This resulted in economic growth for all of last year of about 3.6 per cent.

In the fourth quarter, the Private Consumption Index dropped 2.8 per cent quarter on quarter but grew 0.7 per cent on year.

The Private Investment Index fell 3.3 per cent quarter on quarter and 2.6 per cent year on year.

The Manufacturing Production Index dropped a record 18.8 per cent last month, with lowered capacity use of 58.9 per cent. Production for both domestic and, particularly, export markets has declined.

Exports decreased 9.4 per cent last month in terms of value and 13.4 per cent in terms of volume. As a result, the value of exports grew only 5.8 per cent for the full year, down from 11percent growth in 2007.

The economic slowdown contributed to a slight surplus of US$200 million (Bt6.99 billion) in the trade account last year and a thin deficit of $200 million in the current account.

Amara predicts the country will not experience twin deficits this year, because the trade and current accounts will be neutral or surplus.