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Flooding sinks GDP growth

BUSINESS: The Centre for Economic and Business Forecasting (CEBF) at the University of the Thai Chamber of Commerce has revised its 2011 GDP growth projection downward from 4.4 per cent to 3.6 per cent due to the current flooding, estimated by some sources to be the worst in five decades.

Friday 14 October 2011, 06:05PM

That sinking feeling: Not much sign of economic growth for this woman, sitting on the roof above the flooded lower floor of her house in Ayudhya.

That sinking feeling: Not much sign of economic growth for this woman, sitting on the roof above the flooded lower floor of her house in Ayudhya.

The total bill for flood damage is expected to be B104 billion, according to Thanawat Polvichai, CEBF director.

The B104 billion losses will be split between agriculture (B54 billion), industry (B20 billion), trade (B9.8 billion), tourism (B5.7 billion), public utilities (B9 billion) and housing (B2.2 billion), the CEBF estimates.

The calculation also takes into account the B26 billion damages from floods in the south earlier this year, to give a grand total of B130 billion, which the CEBF argues is equivalent to a 1- to 1.3-point drop in GDP growth.

The Thai economy in the last quarter is predicted to be less robust because farmers will not be able to mortgage rice crops damaged by flooding in the government’s rice pledging scheme, and that in turn will have an impact on their spending ability as the farmers worry about future income.

In addition, falling stock prices resulting from the economic crisis in Europe, lowered consumer earnings and lower levels of spending by consumers could also cause GDP to drop by a further point.

Mr Thanawat added that if the current flood threat to the capital cannot be contained and there is widespread flooding in Bangkok, the bill for damage could rise by a further B20 billion.

On the positive side, Mr Thanawat said he expects growth in the fourth quarter to be 4.3 per cent, thanks to improvements in exports and consumption, offsetting poorer growth earlier in the year to bring in the predicted annual figure of 3.6 per cent.

He predicted that growth in 2012 will be 4.3 per cent.

Also on the plus side of the equation, the Permanent Secretary for Commerce, Yanyong Phuangrach, is predicting that the inflation rate will tend to decline through the rest of the year.

The Consumer Price Index for September 2011 was at 112.86, up from the same period last year by 4.03 per cent. However, the figure was the first shrinkage in inflation in the past six months, he said, “and signified the stability of the Thai economy”.

Headline inflation in September was up 0.33 per cent from August but was the first slowdown in 11 months, thanks to price cuts in such products as fuel and meat, coupled with cheaper transport costs.

Mr Yanyong believed the inflation rate would continue on the decline after September since the effects from the Government’s assistance measures, including minimum wage and salary hikes, rice mortgaging and tax refunds for home and car buyers, would not yet be evident.

The Permanent Secretary said he believes that the flooding in the country will not lead to higher inflation, reasoning that overall demand remains unchanged.

He said he was confident that the Commerce Ministry would be able to maintain the average inflation of this year within the targeted range of 3.2-3.7 per cent.

–Photo AFP



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