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Economy won't be affected by US, EU actions: UBS

THE DOWNGRADING of relations by the EU and US will not prevent the Thai economy from bouncing back in the near future, experts said yesterday. The current political milieu has started to turn positive for the Thai economy, said Edward Teather, senior economist at UBS Investment Bank.

"With the military government suggesting elections are over a year away, it is the general's economic policy that matters in the near term," he said via teleconference from Hong Kong.

Although the European Union and the United States have recently downgraded relations with Thailand, Teather does not see any an immediate adverse impact on the economy.

The EU has suspended official visits to and from Thailand and will not sign a partnership and cooperation agreement with Thailand until a democratically elected government is in place. The EU has also threatened to impose more measures against Thailand, while the US government stopped military aid to Thailand. In the immediate future the Thai economy will bounce back, driven by domestic demand, which is more important than other trends. The political difference would be a long-term issue for Thailand and trade partners.

"Our projection of a near-term growth bounce relies on improving confidence and pent up demand," he said.

The economy last quarter contracted by 2.1 per cent quarter on quarter. UBS predicts growth will resume in the second half of the year. Full-year economic growth is estimated at 1.2 per cent this year and 5.2 per cent next year.

Although Thailand's exports have been disappointing, lagging behind other countries in the region such as Malaysia where exports are picking up nicely, exports would revive in the second half of the year as the recovery in the US economy, one of Thailand's key export markets, gains ground.

Public spending will not play an important role, as new big ticket infrastructure spending may kick in only next year and the budgetary policy appears conservative, he added.

Somchai Pakapatwiwat, a political scientist, said the EU and US actions would not have a negative impact on the Thai economy, but the ruling National Council for Peace and Order should not make the international communities perceive that the military wants to be in power for too long. The reform process should take about eight months or a year and then a general election should be held to return the country to democracy, he said.

Amarin Khoman, an honorary consul at the Benin Consulate, blasted the EU and US, saying they should not take advantage of the situation, as Thais have already suffered from the prolonged political conflict.

"The EU and US should understand the Thai political situation and an election will be taking place when Thais are ready," he said.

The more important issue is how to improve the living standards of Thais.


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