Flood-Hit Thailand Slashes Growth Forecast

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Flood-hit Thailand slashes growth forecast

BANGKOK, October 28, 2011 (AFP) - Thailand's central bank on Friday slashed its economic growth forecast for the kingdom this year as industry and farmers reel from the country's worst flooding in decades.

The Bank of Thailand expects the economy to grow by just 2.6 percent in 2011, down from its previous projection of 4.1 percent, according to its quarterly report.

"The widespread flood, now affecting not only agricultural production but also manufacturing activity, is likely to weigh on the fourth quarter's growth substantially," it said.

The bank may further lower its projection if the situation worsens, particularly if inner Bangkok is flooded, assistant governor Paiboon Kittisrikangwan told reporters.

Thailand's deadly three-month flood crisis has interrupted economic activity and weakened domestic demand, the BoT said, while global economic woes were expected to weigh on exports.

Thousands of inundated factories have been forced to shut down in Thailand in recent weeks, putting more than half a million people temporarily out of work.

Car parts manufacturers and hard-disk drive producers have been particularly severely affected.

For 2012, the bank expects the Thai economy to grow 4.1 percent on the back of a recovery in domestic demand which will help offset slowing exports.

The bank also revised down its inflation forecast for 2011 to 3.8 percent from 3.9 percent. It kept its projection for core inflation at 2.4 percent.

Thailand, whose economy rebounded strongly from political violence last year, has held its interest rate at 3.5 percent since August to boost growth, pausing after a series of hikes to tame inflation.

-- Dow Jones Newswires contributed to this story --

-- (c) Copyright AFP 2011-10-28

[givenall]

Don’t you like the rosy forecast again, no explanations either?Especially when the government does things like minimum wage hike, so the industriesstart building other places instead of Thailand. I wish the Thai governmentstart talking to real economist instead of their fortune tellers

[bkkjames]

Good thing they didn't declare a SOE then

[ronz28]

Floods are a bump in the road that Thailand will recover from. Need to dredge out all the canals and rivers and get going with other flood control work.

Thailand should have plenty of fuel for its future. http://seekingalpha.com/article/303132-chevron-fueling-thailand-s-rapid-growth?ifp=0&source=email_alternative_energy_investing

[KunMatt]

So are all of the car manufacturer's and electronics companies just standing by at the moment, waiting for the floods to recede, writing off all of the damage and losses to non-production and then planning to rebuild the factories again and just continue as normal as if nothing happened?

If the factories and all their produce is totalled then I would think this was the perfect opportunity to find a cheaper country to manufacture in, and one that doesn't flood every decade and have political upheaval every year. Due to the stronger Thai economy and currency Thailand is already expensive to export from. Why would they all come back after this?

[ronz28]

Because the people that are trained and know the production processes are in Thailand ready to get back to work. Factory management knew floods were possible and had some time to move things to the second floor or above, etc. Cleanup and setup is a lot easier than building a factory and training workers elsewhere. Pain in the rear but not insurmountable.

[mommysboy]

So are all of the car manufacturer's and electronics companies just standing by at the moment, waiting for the floods to recede, writing off all of the damage and losses to non-production and then planning to rebuild the factories again and just continue as normal as if nothing happened?

If the factories and all their produce is totalled then I would think this was the perfect opportunity to find a cheaper country to manufacture in, and one that doesn't flood every decade and have political upheaval every year. Due to the stronger Thai economy and currency Thailand is already expensive to export from. Why would they all come back after this?

This is a big knock for Thailand. I wouldn't be surprised if 2% gets revised to 4%.

You'd have thought the manufacturers would set up elsewhere but they don't, something magical about the lure of Thailand, all that free hospitality for the managers I guess.

I can't see how there would be a quick rebound, for a starter there is reduced world demand and then the ever worsening lack of competitiveness.