Politics the main risk factor to 2010 economy

Prime Minister Abhisit Vejjajiva told a seminar hosted yesterday by Thammasat University that the economy was projected to grow by 3.5 per cent after contracting 3-3.5 per cent this year.

However, Thammasat economics lecturer Plaiphol Khumsap cautioned that domestic politics and an uncertain global economic recovery were the main downside risks.

In addition, the economic recovery could be hindered by the unsolved problems concerning 76 suspended industrial projects in Rayong's Map Ta Phut area, as well as by the oil-price up-trend, he added.

Former deputy premier Somkid Jatusripitak agreed the economy would recover next year but warned that the investment and tourism sectors were unlikely to see significant improvements.

Patamawadee Suzuki, dean of Thammasat's Faculty of Economics, said gross domestic product would expand 2-3 per cent next year, aided by a recovery in export industries.

However, higher oil prices and the stronger baht will not bode well for recovery, he said.

Thanavath Phonvichai of the University of the Thai Chamber of Commerce said GDP in the current quarter was now projected to expand by 2.7 per cent, resulting in a 3.1-per-cent contraction for the full year.

For 2010, GDP growth is projected to be about 3.2 per cent, he said.

Abhisit acknowledged that the domestic political situation remained the top challenge as his administration tackled the economic situation.

Rising energy and food prices as well as environmental issues are other obstacles, he said.

Plaiphol agreed fears of increased political instability would distract the government's attention from economic issues.

If the political situation worsened, consumer confidence, tourism and other economic sectors would be affected, he said.

Plaiphol said the US economy would likely return to growth of 1.8 per cent next year, followed by Japan (1 per cent) and the European Union (0.5 per cent).

These major economies will be the locomotives of global growth, which will in turn lift the export-dependent Thai economy.

On oil prices, a stronger global recovery could lead to crude breaking through US$100 (Bt3,300) per barrel, which would result in inflationary pressure, he said.

On the Map Ta Phut deadlock, Plaiphol said it remained unclear how fast the government could resolve the problem after the Central Administrative Court recently suspended 76 industrial projects worth a combined Bt400 billion.

On the Bt1.43-trillion Thai Khemkhaeng stimulus package covering 2010-11, he said the government needed to increase the efficiency of its spending programmes.

Patamawadee said the Kingdom's recovery would be export-driven, due to the recovery of the US, European and Japanese economies.