World Bank projects 2012 Thai GDP to grow 4.5%

BANGKOK, May 23 - The World Bank projects the Thai economy to grow 4.5 per cent this year, recovering from 0.1 per cent growth last year when the country’s economy was impacted by Japan’s tsunami, devastating floods and the eurozone debt crisis, the bank said in its first report on the Thai economy in 2012.

Kirida Bhaopichitr, World Bank senior economist, said that Thailand’s Bt1.5 trillion post-flood rehabilitation projects are likely to support this year’s economic growth by 1.5 per cent.

However, several risks remain, particularly the eurozone debt crisis, which directly impacts Thailand’s export sector. Thai exports this year are projected to grow 12 per cent while exports to Europe shrank 16.3 per cent due to falling demand in the first quarter.

Computer parts and electric appliances were most affected. Low European demand for electric appliances is likely to persist until the second half of this year.

Industrial estates hit by floods last year are expected to be fully recovered at the end of the second quarter this year, with delays of production for export seen in drops of the industrial Manufacturing Production Index (MPI) in January and February at 15 per cent and 3.4 per cent respectively.

The ank urged the government to rethink its populist policies costing the state coffers a large amount of money without substantially increasing economic productivity. The policies are such as the Bt300 billion rice mortgage scheme and the reduction of corporate income and oil excise taxes, causing the government to lose Bt52 billion and Bt9 billion in revenue respectively.

The bank also said the one-child one-tablet computer project is causing a government loss of Bt1.8 billion

These projects as well as others under the populist policies may contribute to an overall loss of government revenue equivalent to 1.5 per cent of 2012 GDP, and its spending could account for three per cent of GDP.

The ank advised that revising the populist policies would help spare budget for basic infrastructure investment which will be a boon for the long-term economy. It will also retain budget to cope with any fallout from the global economic slowdown.

“The government should be prepared to cut whatever should be so that there will be room to maneuver its monetary policy if the eurozone crisis worsens," the bank’s senior economist advised.

"The global economy is highly uncertain. Thailand needs to increase its capacities in investment, which is more effective in boosting the country's competitiveness than boosting consumption,” Ms Kirida said. (MCOT online news)

-- TNA 2012-05-23

BOT says 6%. Big difference.