Monday, September 22, 2008

Thailand's economy to grow 5.3 pct says former fiance minister

Former finance and deputy prime minister Pridiyathorn Devakula said on Sunday the Thai economy will manage to grow 5.3 per cent this year despite the financial chaos in the United States and local political uncertainties.

Delivering the keynote speech on "The Thai Economy: Final Path for 2008," he said US Treasury Secretary Henry M. Paulson's decision to set up a fund to buy debt instruments from ailing financial institutions affected by the sub-prime lending crisis is justified.

He said it would make the US economic woes, which had repercussions in economies worldwide, begin to improve gradually.

M.R. Pridiyathorn said he believed the US investment bank Lehman Brothers' bankruptcy would not escalate and that the severe liquidity shortage the US largest life insurer AIG had faced would not affect its Bangkok-based subsidiary AIA (Thailand), which is the country's largest insurer.

He said AIA is considered a company with a strong financial position and as a juristic person which is clearly separated from its parent firm.

The US financial woes would have a far-reaching impact on the Thai stock market, but have a little effect on the real economic sector.

"Although foreign investors will dump all shares held in Thailand to the amount of US$30 billion, it will not adversely affect the economy because the country has international reserves of up to $100 billion. Also, the stock market is not closely linked with the real economic sector," he said.

M.R. Pridiyathorn forecast exports would decline in the second half of this year due to the economic meltdown in the US, which is one of Thailand's major export destinations.

The inflation rate, which stayed high in the first half of this year, would not decline in the second half of the year though global oil prices had fallen.

He forecast that state investment would accelerate if the government managed to end conflicts and forge ahead to implement the mega-projects.

He conceded the ongoing political turmoil had a direct impact on the tourism business as many foreign tourists cancelled their trips to Thailand.

But should the political impasse ease and the People's Alliance for Democracy (PAD) end its rally in October, tourism would again pick up, he said.

"Overall, the Thai economy is expected to grow less than 5 per cent in the second half of this year, but when combined with the expansion in the first half, it will probably grow 5.3% for this year," he said. (TNA)

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