Thailand Moves To Boost Slowing Economy


Vivian Wai-yin Kwok, 05.03.07,
1:27 AM ET

HONG KONG –

The
Thai government has been forced to admit that the economy has been
damaged since September’s coup. With economic growth this year forecast
to be the lowest since 2001, the government on Wednesday announced a 44
billion baht ($1.2 billion) loan package aimed at small businesses and
low-income earners.

Thais who initially welcomed the September coup that ousted business-savvy Prime Minister Thaksin Shinawatra have
been losing confidence in the military government, and this is hurting
the economy, according to Finance Minister Chalongphob Sussangkarn.

“After
the coup, people are waiting to see a clear signal as to what the
political situation will look like,” Chalongphob told AFX.

However, uncertainty is likely to continue through the December elections that the junta has conceded to.

The
situation may be worsened next month by a verdict on charges of voter
fraud against two major political parties, Thaksin’s Thai Rak Thai and
the Democrat Party. If found guilty, the parties’ leaders will be
banned from politics for five years and have no chance to run in the
coming election.

“People are not sure about what’s going to
happen and this is really affecting our economy,” the World Bank
economist turned finance minister said, according to AFX.

Lacking
stability, fewer Thais have been willing to spend on big-ticket items
like cars and motorcycles. The Bank of Thailand’s private consumption
index dropped 1.4% in March, relative to the same period last year. The
CPI in the first quarter was also 0.5% lower than last year.

With
consumption lower, investment has in turn been scaled back in
machinery, equipment and construction. The private investment index
dropped 2.9% in March year-on-year.

The central bank has cut its
growth forecast for 2007 from 4.0%-5.0% to 3.8%-4.8%. If the economy
expands 3.8%, it would mark the slowest growth since 2001.

According
to the Thai central bank, two-thirds of national income was generated
from exports and tourism in the first quarter and exports grew
dramatically by 18.2% to $34.82 billion.

Nonetheless, many
labor-intensive exporters have seen their margins squeezed,
particularly as the Thai baht has appreciated in value.

It is at a nine-year high against the U.S. dollar.

The
economic slowdown has led to rising unemployment. On International
Labor Day, about 10,000 workers marched through Bangkok’s government
district, accusing the junta of mishandling the economy.

Under
a package unveiled Wednesday to stimulate consumption, four state-owned
banks will make loans worth $1.2 billion, ranging from small amounts to
help low-income people avoid turning to loan sharks, to low-interest
mortgages, to lending for small entrepreneurs.

To bolster the
critical tourism industry, Thai government plans to renovate tourist
sites and train more new guides in the coming months. Despite the
political turmoil, Thailand still ranked as the No. 1 destination on
international travelers’ holiday lists, according to a survey released
Wednesday by Visa International and the Pacific Asia Travel Association.

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