World Bank: Growth this year to fall behind
Parista Yuthamanop
Bangkok Post
Political uncertainties and policy missteps leading to a slackening of investment are expected to slow Thailand's economic growth to 4.3% this year, versus 5% in 2006, according to the World Bank.
"Political disturbances in 2005, the coup in 2006 and the impending elections and transition in 2007 have created considerable political uncertainty which cannot be addressed quickly," the bank said in its new report.
Thailand is expected to trail the region in economic growth, with the World Bank projecting Southeast Asia to post 6.5% growth this year. Emerging East Asian economies should show 7.3% growth this year, down from 8.1% last year.
Other countries in the region are expected to fare much better, with the World Bank forecasting 8% growth in Vietnam, 9.6% in China, 6.3% in Indonesia and 10.5% in Cambodia.
Exports are expected to remain the key driving force for the Thai economy in 2007, as public investment is likely to come in under target due to uncertainties over the government's infrastructure megaprojects.
Kazi Matin, the lead economist for the World Bank in Thailand, said the cut in the growth forecast reflected poor investor confidence as a result of uncertainties in the country's economic policies and political situation.
"Low investor confidence has put pressure on the short-term prospects for the Thai economy, although the economic fundamentals will remain supportive for medium-term growth," he said.
"The main problem for Thailand is a lack of policy clarity and policy direction."
Foreign investors have become increasingly sceptical about the Thai economy since the Sept 19 coup.
Since then, the interim government has perplexed analysts and investors with moves to tighten the Foreign Business Act while the central bank decided to impose capital controls on foreign inflows.
Mr Matin said the government's signing of the Japan-Thailand Economic Partnership Agreement (JTEPA) earlier this week would help restore direct investment from Japan, one of Thailand's most important economic partners.
"The signing of the Japan-Thailand free-trade agreement is already having a positive effect on investor confidence, even if the actual impact on exports and investment will only be felt after it is fully effective in October 2007," he said.
Mr Matin said modifying the Foreign Business Act to liberalise key service sectors would also help boost private investment.
He noted that domestic demand rose only 1% last year, the lowest figure for many years, as private consumption and private investment fell due to the political and policy uncertainties.
"In Thailand, the challenge is to improve private investor confidence through quick policy actions," Mr Matin said.
Global economic growth, meanwhile, is expected to slow to 3.4% this year from 4% last year, as a result of an expected slowdown in the US economy, the world's largest.
Weakness in the US economy and its massive trade deficit will continue to create imbalances for global financial markets.
Capital flows have poured into Asia in search of higher returns, putting pressure on currencies across the region. Asian central banks have intervened heavily in the currency markets to stem appreciation of their currencies to protect their export-led economies.
The issues of market volatility and capital flows dominated the agenda at the 11th Asean Finance Ministers' meeting this week in Chiang Mai, where policymakers pledged to strengthen regional cooperation and coordination to help guard against future economic crises.
Finance Minister Chalongphob Sussangkarn, speaking at the meeting, said market volatility was likely to continue medium term due to global imbalances.
Emerging markets such as Thailand needed to take steps to cope with instability in world markets, he said.
Mr Chalongphob said Asean was now facing similar challenges of economic volatility as it did during the 1997 crisis.
"Political disturbances in 2005, the coup in 2006 and the impending elections and transition in 2007 have created considerable political uncertainty which cannot be addressed quickly," the bank said in its new report.
Thailand is expected to trail the region in economic growth, with the World Bank projecting Southeast Asia to post 6.5% growth this year. Emerging East Asian economies should show 7.3% growth this year, down from 8.1% last year.
Other countries in the region are expected to fare much better, with the World Bank forecasting 8% growth in Vietnam, 9.6% in China, 6.3% in Indonesia and 10.5% in Cambodia.
Exports are expected to remain the key driving force for the Thai economy in 2007, as public investment is likely to come in under target due to uncertainties over the government's infrastructure megaprojects.
Kazi Matin, the lead economist for the World Bank in Thailand, said the cut in the growth forecast reflected poor investor confidence as a result of uncertainties in the country's economic policies and political situation.
"Low investor confidence has put pressure on the short-term prospects for the Thai economy, although the economic fundamentals will remain supportive for medium-term growth," he said.
"The main problem for Thailand is a lack of policy clarity and policy direction."
Foreign investors have become increasingly sceptical about the Thai economy since the Sept 19 coup.
Since then, the interim government has perplexed analysts and investors with moves to tighten the Foreign Business Act while the central bank decided to impose capital controls on foreign inflows.
Mr Matin said the government's signing of the Japan-Thailand Economic Partnership Agreement (JTEPA) earlier this week would help restore direct investment from Japan, one of Thailand's most important economic partners.
"The signing of the Japan-Thailand free-trade agreement is already having a positive effect on investor confidence, even if the actual impact on exports and investment will only be felt after it is fully effective in October 2007," he said.
Mr Matin said modifying the Foreign Business Act to liberalise key service sectors would also help boost private investment.
He noted that domestic demand rose only 1% last year, the lowest figure for many years, as private consumption and private investment fell due to the political and policy uncertainties.
"In Thailand, the challenge is to improve private investor confidence through quick policy actions," Mr Matin said.
Global economic growth, meanwhile, is expected to slow to 3.4% this year from 4% last year, as a result of an expected slowdown in the US economy, the world's largest.
Weakness in the US economy and its massive trade deficit will continue to create imbalances for global financial markets.
Capital flows have poured into Asia in search of higher returns, putting pressure on currencies across the region. Asian central banks have intervened heavily in the currency markets to stem appreciation of their currencies to protect their export-led economies.
The issues of market volatility and capital flows dominated the agenda at the 11th Asean Finance Ministers' meeting this week in Chiang Mai, where policymakers pledged to strengthen regional cooperation and coordination to help guard against future economic crises.
Finance Minister Chalongphob Sussangkarn, speaking at the meeting, said market volatility was likely to continue medium term due to global imbalances.
Emerging markets such as Thailand needed to take steps to cope with instability in world markets, he said.
Mr Chalongphob said Asean was now facing similar challenges of economic volatility as it did during the 1997 crisis.
3 comments:
Yep, I have no doubt that Somdach
Hun Sen will sustained the Rapid
economic growth in the region,
while others can only talk or dream
about it.
Yeah and i do wish that u earn 3800 Riels a day like the rest of more than half of other Cambodian population so that you can enjoy this economics growth, someone seems to be so proud to announce to the world that at least Cambodian people earn 3800 Riels a day compare to bare hand when they first out of Pol Pot regime while he makes millions. Anyway TIC, this is Cambodia.
T.
Hey, how much do you expect people
without education to get pay?
Just look at people in Long Beach;
they still living in a roach
infested government housing. Is
that the US government fault? I
mean because they can't afford
their own home.
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