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Thai GDP may fall as much as 4% in 2009 – IMF

Posted on: April 4, 2009


Reuters – Saturday, April 4

* GDP could shrink between 2 pct and 4 pct this year

* Central bank has room to cut rates further, if needed

By Vithoon Amorn

BANGKOK, April 3 – The Thai economy could shrink as much as 4 percent in 2009, a senior International Monetary Fund official said on Friday, adding that the central bank had scope to cut interest rates further if needed.

“Assuming that there are no major shortfalls in policy implementation, and that political stability is maintained, the fall in GDP growth could be contained to a range of between minus 2 and minus 4 percent,” Nissanke Weerasinghe told a briefing.

The Bank of Thailand has cut its benchmark rate by 225 basis points to 1.5 percent since December as the economy has slumped, and is expected to cut by another 25 or 50 basis points at its next policy meeting on April 8. [ID:nBKK491597] “Monetary policy has reacted appropriately, with the Bank of Thailand cutting interest rates aggressively,” Weerasinghe told reporters after leading an IMF mission to the country to conduct an annual economic review.

“There remains scope for further easing if needed. Inflation has already fallen sharply in line with energy and food prices. Headline inflation for the year is forecast at under 1 percent,” he said.

The finance ministry says the economy could shrink as much as 3 percent this year after a plunge in exports. On Tuesday the Asian Development Bank forecast a contraction of 2 percent in 2009, followed by growth of 3 percent in 2010. [ID:nSP457989]

The IMF team forecast 1 percent growth in 2010 provided that the United States and European Union started to recover from the middle of 2010.

Political instability in Thailand compounded the damage from the global slowdown last year, depressing business confidence and frightening away tourists. After a period of calm, there has been a new wave of anti-government protests in the past week. [ID:nBKK490292]

But Weerasinghe said that even if Thailand were to face another setback brought about by a change of government this year, he did not expect its economic contraction to be much deeper than projected as most of its problems came from outside.

“Thailand has gone through many government changes in the past three years and it has built a tolerance to them. I don’t think the contraction would be much different from what we project if that happened,” he said.

Thailand faced no immediate fiscal instability risks from its aggressive stimulus spending, he said.

“The level of fiscal deficit is just about right. It is still within the realm of sustainability based on the standard we are looking at at the Fund,” he said.

“With revenue expected to fall short of the budget target as a result of discretionary tax measures and lower GDP growth, the central government budget deficit is projected to be around 4.5 percent of GDP. This fiscal stance should help spur domestic demand.”

He estimated that, of the projected fiscal deficit in the year to September, 2.4 percentage points could be attributed to Prime Minister Abhisit Vejjajiva’s stimulus packages to prop up the economy.

“Thailand is in a very comfortable position to use its fiscal resources to navigate its economy through this difficult time, compared to the rest of the world,” he said.

(vithoon.amorn@reuters.com; +66 2648 9737; Reuters Messaging: vithoon.amorn.reuters.com@reuters.net; ))

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1 Response to "Thai GDP may fall as much as 4% in 2009 – IMF"

thank you, this one help me alot.

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