Thailand hits bottom of regional economies

By Thai News Agency

Thailand currently occupies the lowest rung on Southeast Asia's economic growth ladder after a poor 2006 performance, according to a United Nations report which forecasts even lower expansion this year.
The report, released on Wednesday, said that the kingdom achieved only 5.0 per cent GDP growth in 2006, compared to its 4.5 per cent growth in 2005.

While the Thai economy rose marginally, the forecast for the coming year is that Thai GDP growth is expected to be lower in 2007 than 2006, at 4.7 per cent, pressure for the baht's appreciation will likely continue, and investment looks gloomy, with only Indonesia performing more poorly in the region.

The United Nations Economic Commission for Asia and the Pacific (UNEscap) in its annual economic and social survey, "Surging Ahead in Uncertain Times", unveiled in a press conference at the Foreign Correspondents' Club of Thailand, noted that for the eighth year the region grew faster in regard to economy than any other region worldwide, registering 7.9 per cent growth in 2006, up from 7.6 per cent in 2005, but that Thailand isn't in the same picture.

A wait-and-see attitude among foreign investors and "ongoing political tensions" mean that Thailand's macroeconomic outlook will be "subject to greater downside risks than other southeast Asian economies."

However, Thailand leads much of the Asian region in gender equality, while South Asia lags behind, according to UNEscap Emerging Social Issues chief Thelma Kay, who said that in government and business Thai women occupy more powerful positions and that access to meaningful employment and educational opportunities is better in Thailand than most other countries in the region.

According to UNEscap deputy executive secretary Shigeru Mochida, "Thailand is such an important country in the region, and in the world, that everybody is watching and hoping that everything will be settled very soon (as the post-coup d'etat government intends) and that we can expect a predictable regime and stable economic policies."

The United Nations Economic Commission for Asia and the Pacific (UNEscap) annual economic and social survey, "Surging Ahead in Uncertain Times", noted that for the eighth consecutive year the region grew faster in regard to economy than any other region worldwide, registering 7.9 per cent growth in 2006, up from 7.6 per cent in 2005, but that Thailand isn't in the same picture.

While not directly addressing the capital controls measures imposed by the Bank of Thailand in December last year, Escap predicted that exchange rate management will be the region's biggest challenge through the year, and anticipates the need to recast major regional currencies to appreciate due to capital inflows and imbalances in the US economy. Central banks throughout the region can choose any two of three policy options, according to the report, targeting exchange rates, having an independent monetary policy, or keeping capital accounts open but not all three at the same time.

Escap sees greats exchange rate flexibility as one sustainable solution that would take away the "one-way bet" that encourages speculative capital inflows.

Shortages of capital funds are hindering the recovery of private investment in Thailand, Mr. Kumar explained, as well as other countries in East Asia. Credit shortage was evident in the kingdom as the share of individual consumption loans rose from 12 per cent during 2000-2005 as compasred to 24 per cent by mid-2006.

Six major possible downside risks are identified: an oil price shock; an abrupt cooling of US housing markets; a disorderly unwinding of global imbalances; a reversal of Japans' emergency economic recovery; economic "overheating" in China; and an avian flu pandemic.

UNEscap says that Thailand is, like many neighbours, increasingly vulnerable to a new currency crisis, comparing the situation to that of the 1997 economic crisis -- but without saying that such a crisis will occur.

Thailand's vulnerability , like other regional crisis-hit countries, "is due to appreciation of the currency driven by short-term capital inflows, and inflation in the economy from higher oil prices.

UNEscap economist Raj Kumar noted that the Thai market responded to oil price pressures with a 1.5 per cent fall in oil consumption, despite 5 per cent economic growth.

The survey also said that gender inequality causes the region to lose US$42-47 billion annually due to restrictions on women's access to employment and another US$16-30 billion a year because of limits to women's educational access.

Much of the economic uncertainty is an unfavourable external environment, largely due to the slowing of the US economy and "a modest decline in global electronics demand," the report notes, giving the Asia-Pacific region high marks with continued dynamism "despite risks of further oil price shocks and a sharp depreciation of the US dollar."

The survey warns that interventions by monetary authorities to keep currencies down are leading to inflated asset values, especially in housing and equity markets.

Some 16 per cent of GDP and more than one-third of overall world economic growth is taking place in Asia, according to the UN Economic and Social Commission for Asia and the Pacific (UNEscap).

"The three big Asian economic China, India and Japan will maintain the growth momentum and may provide good opportunities to other countries," UNEscap executive secretary Kim Hak-Su said before the launch.