Posted on 25 Nov 2009
Thailand to grow 6% next year
The Thai economy is likely to rebound strongly next year, thanks to improving consumer purchasing power in the United States and local policy support, says Paul Donovan, managing director for global economics at UBS.
Americans are more confident they will be able to keep their jobs. Meanwhile the most recent survey by the Federal Reserve of US banks found that they had more confidence in their lending prospects, therefore easing concerns about eroding consumption.
"The increase in unemployment in the US came from those who have registered as unemployed and want to look for a job, not from job losses," he said at a briefing in Bangkok.
A US consumer who wants to buy a TV set but was refused bank credit will send another family member to look for a job rather than dropping the plan to buy it, he said in an analogy.
The fact that one out of 10 US citizens is jobless, coupled with subdued bank lending growth, are economists' main concerns about the recovery prospects of the world's largest economy and Asian economies due to their heavy reliance on exports to the US.
Mr Donovan said the US economic recovery next year would reach its average, albeit lower than the pattern typically following a recession. Moves by US companies to build inventory again will add to US economic growth next year.
UBS forecast the US and Europe will grow 2.5% next year, compared to contractions of 2-3% this year. It expects the Thai economy to grow by 6% next year and 5% in 2011, compared to minus 3% this year.
"We are confident of 6% growth for Thailand next year. The growth will benefit from export momentum. Existing stimulus policy is expected to result in more momentum next year - not much of it has been felt in the second quarter," Mr Donovan said.
He said Thai exports would play a big role in the economic recovery in 2010, with the growth trend becoming visible in October.
US policymakers are expected to continue their stimulus policy next year to resolve the unemployment problem. But a stronger recovery in the US will lead to a weakening dollar as it will suffer more losses from net export and tourism income.
"A W-shaped recovery in the US will occur only when there are big policy errors for a double dip. Once the consumers start spending, they will likely carry on," Mr Donovan said.
As a result, the Thai baht is expected to appreciate to 31 to the dollar in 2011, he said.
The United States reported better-than-expected corporate earnings in the third quarter although the economy was worse than expected. This is because large companies have fewer problems than small companies, a contrast to what happened during the recession in 2001 when large companies led the slump, Mr Donovan said.
