• 
• 
• 

The US is forecast to grow 1.8 per cent after contracting 2.5 per cent this year, while projected 2010 GDP growth rates in Japan and EU are 1 and 0.5 per cent respectively.

As for Thailand, the economy is expected to return to a growth of 3.5 per cent after contracting 3 to 3.5 per cent this year as the export sector, which accounted for more than 60 per cent of Thailand's GDP prior to the crisis, shows signs of recovery.

Thailand and other exporting economies in Asia are getting orders as buyers in the US, Europe and Japan start re-stocking.

Given that the export orders are only being recovered in the last quarter of this year, Thailand's export earnings for the whole of 2009 are projected to decline by only 15 per cent rather than over 20 per cent as previously expected. The recovery is expected to continue well into 2010.

A report from Citibank suggested that if the global crisis and recent onshore risks had heightened the sensitivity of average households, Thailand's economic recovery in this cycle would be export-driven as evidenced by the more bullish business sentiment index than consumer confidence which, however, turned bearish in October.

According to the report, consumers remain sensitive to macro news heavily laced with downside risks, such as the Map Ta Phut deadlock in which 76 industrial projects worth a combined Bt400 billion have been suspended.

The report also cited the improving offshore demand as apparently underpinning bullish business sentiment over the next three months.

Based on the Federation of Thai Industries' (FTI) survey conducted last September, business sentiment has risen to a record high, with the next three-months' domestic sales index also rising.

Secondly, monthly indices comprising the third quarter business sentiment surveys are close to matching recent highs registered in early 2008 soon after the December 2007 elections. On the other hand, consumer sentiment, which dipped last October, has yet to make significant improvements.

Consumers will also be more bearish if there is increased political instability.

Prime Minister Abhisit Vejjajiva admitted that managing the political situation wouldl be a major challenge next year. If the political situation worsens, it will distract the government's attention from economic issues. Consumer confidence, tourism and other economic sectors will also take a hit.

However, the Citibank report noted that there was an upbeat confidence to buy new cars, and other big-ticket consumer items based on August-October data amid the sober overall consumer sentiment.

For example, consumers' willingness to buy new cars rose to a new high since January 2004, while their preference to buy a new house registered by the October index matched that of the second quarter of 2008.

This could also be the result of persistently low interest rates and banks' increased willingness to provide credit.

The willingness index in the third quarter of this year appears to track intra-month gains posted by car sales during the quarter, so demand remains favourable despite the October dip in consumer sentiment.