The Fiscal Policy Office (FPO) at the Ministry of Finance has recently announced its forecast that the Thai economy for 2009 will contract at -3.0 percent, as a result of the global economic crisis that adversely affected the export volume of goods and services.
Despite the sharp contraction during the first half of the year, the FPO has projected that the economy would start to recover in the second half of 2009, and show positive growth in the last quarter of the year. Major contributing factors to Thailand’s economic recovery are expanding public expenditures, especially from investment expenditures under the “Strong Thailand 2012” program, along with the revival of major trading partners’ economies, particularly the Asian economies. Nonetheless, the Thai economy still faces some risks from the slow recovery of private expenditures in both consumption and investment. The sharp contraction in private spending, particularly during the frst half of the year, would cause average private consumption in 2009 to shrink at the rate of -1.0 percent.
Inflation is projected to contract by -0.8 percent per year, following declining oil prices compared to last year, as well as the appreciating trend of the Thai Baht. The unemployment rate is projected to be 1.8 percent of the total labor force, as the employment situation improves following overall economic recovery in the second half of the year. The current account in 2009 is projected to record a large surplus of 8.0 percent of GDP, due mainly to the expected trade surplus of US$20.5 billion.
The Thai economy for 2010 is forecast to expand at 3.3 percent per year (or within the range of 2.5 – 4.1 percent per year), given continued expansionary fiscal policy from late 2009, particularly from public expenditure under the “Strong Thailand 2012” program, as well as the revival of private expenditures from the low base set in 2009. In this connection, public consumption growth in 2009 is projected to accelerate to 6.4 percent per year, while public investment growth is projected to increase to 5.3 percent per year. As for internal economic stability, inflation is projected to rise to 2.5 percent per year (or within the range of 2.0 – 3.0 percent per year), following the increasing oil price compared to 2009. The current account in 2010 is projected to record a smaller surplus of 4.0 percent of GDP (or within the range of 3.7 – 4.6 percent of GDP), as the revival in domestic demand would lead to faster expansion of import value than export value.
Public investment is forecast to accelerate to 8.2 percent per year (or within the range of 5.2 – 11.3 percent per year), while public consumption in 2010 is projected to expand at the rate of 4.8 percent per year (or within the range of 4.0 – 5.7 percent per year.) In addition, recovery of private expenditures from the low base in 2009 would support Thailand’s economic expansion. In this connection, private consumption is forecasted to grow at 4.2 percent per year (or within the range of – 4.7 percent per year), as household incomes increase following the economic revival with employment conditions and work hours returning to normal level. Private investment in 2010 is projected to grow at 6.6 percent per year (or within the range of 2.7 – 9.0 percent per year), partly due to the public investment under the “Strong Thailand 2012” program that would lead to a crowding-in effect for private investment. Meanwhile, export of goods and services in 2010 is forecasted to grow at 5.6 percent per year (or within the range of 4.8 – 6.7 percent per year), as the economies of major trading partners recover as well as improve from the low base last year. The growth of import volume of goods and services is projected to accelerate to 12.4 percent per year (or within the range of 10.6 – 14.2 percent per year), as a result of the recovery of domestic spending and export recovery.
Headline inflation in 2010 is projected to increase to 2.5 percent per year (or within the range of 2.0 – 3.0 percent per year) as global oil and agricultural prices are expected to rise in line with the recovery of the global economy. The unemployment rate is expected to further decline to its normal level at 1.3 percent of the total labor force (or within the range of 1.0 – 1.5 percent of the total labor force). As for external stability, the current account is projected to decline from the previous year, but still record a surplus of 4.0 percent of GDP (or within the range of 3.7 – 4.6 percent of GDP).
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