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Thai finmin sees GDP shrinking 2.5-3.5 pct in 2009

Reuters - Friday, June 26

* Annual GDP growth of 2-3 percent seen in Q4

* 2009 exports seen down 20.2 pct, imports 31.7 pct

* BOT policy rate seen steady at 1.25 pct to end-2009

By Kitiphong Thaichareon

BANGKOK, June 25 - Thailand's Finance Ministry forecast on Thursday that the economy would shrink 2.5-3.5 percent this year, slightly more than the 2-3 percent contraction it had predicted in March.

But the ministry expected the economy to show positive annual growth of 2-3 percent in the final quarter, helped by government stimulus measures plus the low base for calculation, said Ekniti Nitithanprapas, spokesman for the Finance Ministry's Fiscal Policy Office.

"The economy should improve after hitting bottom in the first quarter, helped by government spending to boost consumption and investment," he told a news conference, referring to a 7.1 percent annual contraction in the first three months of 2009.

The ministry predicted the economy would shrink 4-5 percent in the second quarter from a year earlier and 3-4 percent in the third quarter, he said.

Its 2009 GDP forecast is the same as that given by the state planning agency on May 25, reflecting the global slowdown that has hit export demand and domestic political unrest that has hurt business confidence and tourism.

However, Prime Minister Abhisit Vejjajiva said earlier this month the economy could shrink as much as 5 percent this year.

His government, which took office in December after protracted political unrest, has focused on reviving the economy, which is going through its first recession in a decade.

The government is seeking to borrow 800 billion baht ($23.4 billion) to fund more stimulus spending and fiscal deficits. It will offer 50 billion baht of savings bonds next month, with an attractive coupon to lure small investors. [ID:nBKK378252].

STEADY RATES

Ekniti said the ministry predicted the Bank of Thailand's policy rate would remain at 1.25 percent until the end of the year.

The central bank surprised markets by keeping the rate unchanged last month after cutting it four times by a combined 250 basis points since December.

However, BOT Governor Tarisa Watanagase told Reuters last week that the central bank was ready to cut the rate again if economic conditions deteriorated.

Ekniti said the ministry forecast exports would fall 20.2 percent this year after a 16.8 percent rise in 2008 and imports could plunge 31.7 percent this year.

Private consumption is expected to drop 0.3 percent and private investment to decline 12.4 percent in 2009, he said.

A weaker baht will help the economy more than lower interest rates because if the currency weakens one baht against the dollar, it will help boost GDP by 0.3 percentage point, but a rate cut of one percentage point would lift GDP only 0.03-0.04 point, Ekniti said.

However, Tarisa said the baht <THB=> was still competitive and moving in line with other regional currencies. [ID:nBKK464937]

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