Speaking of his meeting with concerned agencies to assess the economic impact from the floods, Finance Minister Thirachai Phuvanatnaranubala stated that the BoT and the National Economic and Social Development Board (NESDB) estimated the total cost of damages to be around 60 billion THB and 80-90 billion THB respectively. Such figures would likely result in a lower GDP by 0.6-0.9 percent.

On this occasion, the Minister suggested the central bank to maintain the policy interest rate at a reasonable level and refrain from using the current flood situation and the rising product prices as an excuse to increase the rate.

Regarding the Finance Ministry’s contribution to the flood relief effort, Mr Thirachai said problems in the disbursement of assistance money were being fixed at haste. A portion of the fiscal 2012 budget will also be set aside for repairing the damaged utility system and improving the basic infrastructure for handling more floods in the future.

Speaking with more than 10 institutional investors including the Thanachart Securities Public Co Ltd about the government’s policy as well as economic and political perspectives, the Prime Minister confirmed that the political situation was under control. He said the projects and budgets under the Strong Thailand Scheme were to be moved on as planned.

Mr Abhisit Vejjajiva elaborated that the GDP currently was at 4-5% and the government would try its best to shove the GDP up to 6% this year.

He also affirmed that the government had no policy to increase tax rate particularly value added tax as concerned by investors, since all government operations in both investment and budgets were in line with the plan.

The Thanachart Executive Assawinee Tailanka said that this meeting with the Prime Minister could regain the investors’ confidence but the investment could not proceed immediately as they needed to observe other involved factors before making decision.

Director-General of the Public Debt Management Office (PDMO) Jakkrit Parapuntakul indicated that this year’s public debt was unlikely to rise beyond 48% of the GDP, as opposed to the initial target of 52%. He reasoned that the government now relied less on loans as the 400-billion-THB loan bill was recently revoked by the cabinet. He elaborated that this year’s higher-than-expected state revenue collection had enabled the government to repay all debts worth 40.2 billion THB before the deadline and allowed the country’s economy to consistently grow.

According to the PDMO’s forecast, the public debt ratio for the year 2012 has a tendency to peak but should stand at around 55-56% of the GDP, rather than 60% as originally projected.

Ministry spokesperson Ekniti Nitithanprapas said that GDP in the third quarter of 2009 edged up by around 2 per cent from the second quarter because the economy was bolstered by the faster budget disbursement and the economic recovery of key trade partners such as China, Australia and Hong Kong.

He predicted that GDP in the fourth quarter would turn to grow 3-4 per cent under the assumption that Dubai oil prices stay at an average of US$75 per barrel.

On mounting concerns over a threat by anti-government Red Shirt protesters to hold a major protest late next month, Mr. Ekniti allowed that it would slow the recovery of the local consumption and investment.

The risk from political factors, if persistent in the medium term, would impact the continuity and consistency of the government’s policy.

He said the ministry’s expectation that GDP in 2009 would shrink some 3 per cent had not yet been factored in impacts from the possible political turmoil. (TNA)

However, there remain key negative factors to Thailand’s economic recovery, including political divisiveness and concerns at the stability of a shaky government.

During the overseas road shows, he said, foreign investors still question political uncertainty in Thailand. It is considered a weakness when compared with neighbouring countries such as Indonesia, Singapore and the Philippines where political divisiveness is not the case.

Rising oil prices are another negative factor that should be monitored because it is expected the global fuel prices would climb to surpass US$70 per barrel.

The oil price hike stemmed from higher market demand as a result of the global economic recovery. It would fuel production costs of listed companies.

To maintain the production efficiency, he said, the listed firms needed to find ways to manage the costs.

Mr Pakorn forecast the daily trading volume in the Stock Exchange of Thailand (SET) would increase from an average of Bt8 billion to Bt16-17 billion because foreign investors and institutional investors had increased their trade on the market. (TNA)

However, FPO’s Director-General Somchai Sujjapongse said there are certain factors that need to be monitored given that the government’s revenue is expected to fall short by 280 billion baht less than forecast.
 
Another positive sign for the economy is an increase in value-added tax (VAT) collection nationwide to 35 billion baht in April from 30 billion baht the month before.

He said the agency will continue to monitor VAT collection in May and June with the expectation that revenues would to improve on the back of increasing domestic consumption. Regarding a revelation by the Thai Chamber of Commerce that consumer confidence index in April had dropped in all categories for the third consecutive month, he said the data was based to a great extent on pessimistic predictions and had the current VAT collection data been available, results of the survey might have been different.
 
However, the FPO is projecting gross domestic product (GDP) will shrink 6 per cent in the first quarter of this year, 4 per cent in the second quarter, and 3 per cent in the third quarter before turning to growth of 1 per cent in the fourth quarter.

GDP for the whole year is forecast to contract on average between 3 and 4 per cent, he said. (TNA)