Thai growth set to fall by a third

Thai growth set to fall by a third
By Mure Dickie in Tokyo and Tim Johnston in Bangkok
Copyright The Financial Times Limited 2010
Published: May 21 2010 08:24 | Last updated: May 21 2010 21:38
http://www.ft.com/cms/s/0/74c966d2-64a2-11df-aa4d-00144feab49a.html


Thailand’s political turmoil could slice nearly a third off economic growth this year, according to Korn Chatikavanij, finance minister, in a sombre assessment of the deep damage caused by nine weeks of protests.

“We could reasonably have looked forward to anything like 7 per cent growth for the year, without the political conflict. But with the conflict and the way it unfolded, it could easily be two per cent off that,” Mr Korn said in an interview.

His comments came as Abhisit Vejjajiva, the prime minister, delivered an untypically emotional address to the nation calling for reconciliation.

“Fellow citizens, we all live in the same house. Now, our house has been damaged. We have to help each other,” he said.

His government faces an uphill battle. More than 80 people – the vast majority, protesters – died in the protest, stoking the fury of demonstrators already angry over what they perceived as the double standards of the urban elite and their outsize share of the country’s wealth.

“We did not lose – we will start a new fight,” shouted one protester as demonstrators arrived back to cheers in the city of Chiang Mai, deep in the rural heartland of the opposition. Almost a third of the country is still under curfew.

To start reconciliation, the finance minister said he was finalising a “healing and reconstruction” plan to help individuals and businesses affected by the protests. He hoped the plan would be ready for cabinet approval by Tuesday. “The good news is that we have the money – government revenues are far exceeding the original budget because of the rapid economic recovery,” Mr Korn said.

The finance minister noted that Thailand had been fortunate that it had gone into the crisis with a “very robust” economy. With a low base set in early 2009 during the worst of the global slowdown, first quarter gross domestic product would also be up on a sequential basis – but the impact of the protests meant it would be “struggling” to sustain such improvement, he said.

Three weeks ago the Bank of Thailand raised its GDP forecast for the full year to 4.3-5.8 per cent, up from 3.3-5.3, saying it expected export growth driven by the revival of the global economy would outweigh the costs of the protests.

Mr Korn stressed the importance to political reconciliation of a roadmap for reform offered during negotiations with the protesters and held out the prospect of an “early election” though he stressed this could only take place when the prime minister would be able to campaign without fearing for his life.

While blaming Thaksin Shinawatra, who was removed as prime minister in a military coup four years ago and now lives in exile, for engineering the demonstrations, Mr Korn said reconciliation talks would be open to those of his supporters who had not sought to overthrow the government through extra-constitutional means.

He said in spite of the bloodshed that surrounded the suppression of the protests, Thailand could be proud that it had survived the crisis without succumbing to the sort of military coup or government collapse common in past decades.