Third revision brings 2011 projection down to 1%

The Bank of Thailand revised down its 2011 growth forecast for the third time to 1 per cent, following the historical flood losses.

Early this year, the central bank expected the economy to expand 4.1 per cent last year. In October, when floods reached Bangkok, the forecast was cut to 2.6 per cent. Then, in November, it was cut again to 1.8 per cent.

To Paiboon Kittisrikangwan, an assistant governor, this is in line with the higher loss estimates to the economy. The losses are estimated at 3.1 per cent of the gross domestic product (GDP), up from the November forecast of 2.1 per cent. Pulling down the economy was also the supply-chain disruptions induced by Japan’s earthquake and tsunami as well as the global slowdown.

Due to the floods, the economy suffered the most in the fourth quarter. Damages in the quarter are greater than the previous two crises - the US sub-prime crisis and the 1997 financial crisis, he said.

In the fourth quarter of 2011, the Thai economy shrank 7.4 per cent quarter on quarter and 5.2 per cent year-on-year. During the sub-prime crisis, the economy contracted for three consecutive quarter with the sharpest quarter-on-quarter contraction of 5.1 per cent. During the 1997 financial crisis, the economy also contracted for five consecutive quarters.

Thailand witnessed negative impacts from the flood for only one quarter and will likely see a rebound in the first quarter of this year, Paiboon said.

The BOT raised its 2012 growth forecast to 4.9 per cent from its previous estimate of 4.8 per cent, mainly due to post-flood recovery.