Growth expected to dip to as low as 1%, with impact on region as well
By
Jessica Cheam
ECONOMISTS fear serious repercussions for Thailand's economy in the wake of the week-long seizure of Bangkok's two main airports.
Analysts whom The Straits Times spoke to yesterday predicted bleak numbers: fourth-quarter economic growth in Thailand of less than 3 per cent at best, and an anaemic 1 per cent at worst.
Thailand's economy grew 4 per cent in the third quarter, down from 5.3 per cent in the second quarter. Officials have said it was expected to grow 4.5 per cent this year, but that is now unlikely. The economy grew 4.9 per cent last year.
News agency reports have suggested that competing Asian hubs such as Singapore may benefit from the current disruption to the Thai economy as companies divert their businesses and demand for services to the Republic.
But economists say this is 'short-term' and that in the long run, the effect is a 'net loss to the region'.
CIMB-GK economist Song Seng Wun said it was too early to quantify the actual damage the protests have inflicted on the Thai economy.
He said although Singapore is regarded as a safe haven within the region and might benefit from diverted economic activity, 'any disruption in trade with Thailand' will hurt the local economy, as Singapore is heavily dependent on trade.
Mr Jun Trinidad, a Citi regional economist based in Manila, said yesterday's court intervention will bring 'some short-term political relief and perhaps uplift market sentiment' for Thailand.
The recent upheaval 'does not necessarily mean Thailand will spin into recession', said Mr Trinidad. But due to the expected change of government, fiscal spending will be delayed and the Thai economy will have downside risks for the next two quarters, he added.
He is forecasting economic growth of 1 per cent for next year and believes the Thai economy will bottom out in the first half with flat growth or even contraction.
Finance Minister Suchart Thada-Thamrongvech said he expected growth next year to be as low as 2 per cent, adding that it would take over a year to restore confidence after the current crisis.
Ratings agency Standard & Poor's (S&P) had revised Thailand's sovereign credit ratings to negative from stable on Monday, saying that the political unrest that began in August has increased the risks to sovereign creditworthiness.
'It has caused serious disruptions to economic activities in the kingdom and raises the possibility of widespread violence markedly,' said S&P credit analyst Kim Eng Tan. 'These developments will add to the negative pressures of a global slowdown on Thailand's economy.'
HSBC economist Robert Prior-Wandesforde was a little more bullish, adding that he does not anticipate a widespread exit of firms out of Thailand. Foreign direct investment has held up 'relatively well', although it has been lacklustre of late due to global economic conditions.
He believes the recent disruptions will make a 'small dent' in fourth-quarter GDP numbers. He noted that Thailand's tourism sector, although heavily affected, could recover quickly.
