Thursday, August 21, 2008

Exports and crop prices boon for Thailand

PHUSADEE ARUNMAS

Ample exports and high farm prices will buffer the Thai economy from global economic woes, said M.R. Pridiyathorn Devakula, a former finance minister.

The Thai economy managed to grow satisfactorily at 6% and 5.7% in the first and second quarters respectively while major economies such as the United States, European Union and Japan experienced slow or negative growth and faced a possible recession, he said.

Thailand's sound economic expansion was helped by better-than-expected export growth and significant increases in prices of five key farm products: rice, cassava, palm oil, natural rubber, and sugarcane. He said incomes earned in the farm sector in June surged 62% from the same month last year.

''We will see people in the rural sector earn higher incomes for the first time this year. It will help boost local spending and prevent a Thai recession,'' M.R. Pridiyathorn said in an address titled ''The Future of the Thai Economy: How to Weather the Crisis'' at a seminar to mark the 88th anniversary of the Commerce Ministry.

He conceded that second-half exports might not grow as much as the first half due to an expected weakening of the economies of major destinations including the US, EU and Japan.

M.R. Pridiyathorn brushed aside concerns over the ongoing political turmoil on the economy, saying the tension had now eased to a certain extent.

He suggested the government take this opportunity to implement policies that enable incomes earned in the farm sector to grow continuously for at least three years because it would make local consumption recover.

More importantly, he said, the Thai economy would be able to count on the agricultural sector for sustainable growth in the future instead of the export sector at present.

He said the government should also encourage the use of ethanol and bio-diesel since it could help boost farm product prices. He believed prices of farm products used to produce alternative energy including cassava, palm oil and sugarcane would remain hefty in the second half of the year.

The former central bank governor forecast rice prices this year would rise by at least 50% from last year because they had already doubled in the first half.

He also projected inflation would climb in the second half due to a sharp increase in production costs including wages, but not oil prices, the main culprit in the first half of the year.

However, he believed the inflation rate would finally ease and stay around 7-8% for the year because global oil prices are likely to continue dropping to US$100-110 per barrel.

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