UTCC contracts Thai 2011 GDP projection to 1.4%, lowest in 2 years

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BANGKOK, Dec 15 – The University of the Thai Chamber of Commerce (UTCC) Economic and Business Forecasting Center revised Thailand’s 2011 economic growth or gross domestic product (GDP) projection to 1.4 per cent, lowest in two years, said centre director Thanawat Polvichai.

The earlier 2011 GDP growth forecast was 3.6 per cent but GDP in the fourth quarter of 2011 has been affected by the flood crisis which slashed about Bt350 billion from the economy. GDP in the fourth quarter is likely to shrink 3.7 per cent, particularly the industrial sector, possibly contracting 10.4 per cent.

Output suspension has impacted exports in the fourth quarter which are likely to shrink 5.5 per cent, with the greatest impact on the auto industry while consumption is forecast to contract two per cent and consumer confidence to drop substantially to the lowest in ten years.

Regarding the economy in 2012, GDP growth is projected to rise 4.7 per cent from the earlier projected 4.3 per cent due to the Bt500 billion budget to be used for post-flood rehabilitation.

The government’s deficit budget and loan offer by commercial banks will stimulate the Thai economy next year to grow more than this year.

GDP in the second half of 2012 will grow 5-7 per cent, better than the 3-4 per cent growth expected in the first half of the year, provided that major export manufacturers will resume production in Feb-March 2012.

Moreover, exports will resume in the second quarter next year, the government’s daily minimum wage rise to 300 baht and the rice mortgage scheme will support higher purchasing power for consumers.

However, the Thai economy in 2012 is likely to grow 5-7 per cent if the government helps commercial banks to issue loans and expedite exports to reach a target at 15 per cent and promote tourism to attract up to 20 million tourists.

However, the European economy must be monitored. If its problems worsen, damage could be worse than in the sub-prime crisis. Thai economy in 2012 may grow only 2-3 per cent but the case is only minimally likely to happen.

The investment sector in 2012 is expected to expand 10.6 per cent, the agricultural sector 3.4 per cent, industrial sector 5.5 per cent, and exports by 10.2 per cent.

Inflation is forecast to stay at 3.5-4 per cent. The baht is likely to stay at 29-30 baht against the US dollar. Key interest rate is expected to increase within the range of 0.50-0.75 per cent from the existing rate of 3.25 per cent.