We could have been in a much better economic position if it weren't for the protracted chaos in Bangkok
The Thai economy has expanded the most since the last quarter of 1995, rising 12 per cent in the three months ending March 31. This increase was significantly beyond market expectations. The spectacular growth came ahead of the worst political violence since May 1992. However, the economic prospects for all of 2010 have been dampened by the political turmoil, which will not fade away quickly.
In his quarterly presentation, National Economic and Social Development Board Secretary-General Amporn Kittiamporn yesterday provided a mixed account of the state of the Thai economy. The Thai growth rate, he said, lagged in Asia only behind that of Singapore and Taiwan.
The Thai economy is driven primarily by exports, which grew an estimated 32 per cent in the first three months of 2010 from the same period a year earlier to US$44.3 billion. Exports account for more than 65 per cent of Thailand's gross domestic product (GDP). Private-sector investments also rose 22.8 per cent during the quarter.
The Royal Bank of Scotland, in a report today, said it is likely to revise the full-year GDP growth forecast of 5.8 per cent. There is room for growth to expand further.
Highlights from the 2010 first quarter economic disclosure include gross domestic product at B2.6 trillion ($80 billion). Other points of note include: 1) economic growth at Bt375 billion (17 per cent) in baht terms; 2) exports increased Bt310 billion year on year, supporting the underlying economy (however, net exports decreased Bt110 billion year on year); 3) consumption increased Bt100 billion year on year; 4) fixed capital formation added Bt100 billion year on year, and government consumption Bt27 billion; and 5) adjustment to inventories (re-stocking) contributed the most to year on year growth, up B255 billion.
While the year started out strongly for Thailand, prospects for the full year have been dampened by the political instability and violence in Bangkok in April and May, brought about by the anti-government demonstration in which protesters seized the heart of the capital's commercial district.
On Wednesday, the government dispersed them from their protest sites, which they had occupied since April 3. The crackdown sparked rioting, and 36 building were set alight. Amporn said the Thai economy could have grown 6 to 7 per cent this year without the political chaos in Bangkok, but now his board has lowered its forecast to 3.5 to 4.5 per cent GDP growth in 2010.
This prompted Korn Chatikavanij, the finance minister, to say last week that the economic figures will be less rosy from the second quarter onwards.
DBS Global Research, in a report yesterday, estimated that the political instability has reduced Thai growth by two percentage points each year since 2006 and the violence this year has cost an additional 1 per cent of GDP.
The rioting erupted across Bangkok on May 19 after the security forces backed by armoured vehicles cleared the anti-government protest camps and forced their leaders to surrender. The buildings that were set alight included the Stock Exchange of Thailand, CentralWorld, the nation's biggest shopping complex, owned by Central Pattana, and at least eight branches of Bangkok Bank, the country's biggest lender.
Now the task ahead for the government is to restore confidence. This is a critical question. Ampon made it clear that Thai growth could have expanded significantly this year had it not been for the violence.