IMF official says thailand on the right track

This is based on an assumption that political stability is maintained and there are no major shortcomings in implementing stimulus measures.

For 2010, GDP is forecast to return to positive territory, growing 1 per cent, but this will depend a lot on recovery in the US, the European Union and Japan.

The IMF official, who headed a consultative mission to Thailand, said US economic recovery was expected in the middle of 2010.

The IMF has endorsed the Thai government's economic stimulus measures, which will lead to a budget deficit of 4.5 per cent of GDP in the next few years.

The official also welcomes the Thai government's bid to push for more credit guarantees to encourage banks and other financial institutions to lend more money to businesses and industries.

Finance Minister Korn Chatikavanij said yesterday the government still had room to aid the economy after gross domestic product fell about 5 per cent in the first quarter from a year earlier, the most since 1998.

Meanwhile, the Small Industry Credit Guarantee Corp (SICGC) will have to increase its role in restoring health to the Thai credit system as it is crucial to a solid economic recovery, according to the central bank.

Bank of Thailand deputy governor Bandid Nijathaworn said more liquidity was needed for businesses and industries but banks and other financial institutions were reluctant to lend more money.

As a result, the SICGC needs to step in to improve the situation by providing credit guarantees to lower the risk for lenders at this juncture.

The lack of liquidity has damaged the viability of many businesses and industries amid the current economic downturn, prompting them to consider laying off more workers.

The SICGC operates a Bt30-billion credit-guarantee facility to reduce risk for lenders. The amount is sufficient to cover new loans amounting to Bt300 billion.