The latest economic figures on 2000 released by the Office of the National Economic and Social Development Board (NESDB) report growth of 3.1 percent in the last quarter of 2000, or annual growth of 4.3 percent. In light of this assessment, Thai Farmers Research Center (TFRC) Co., Ltd., has projected the first quarterly expansion and the annual economic outlook for 2001, as follows:

• Declining exports in the first two months this year, compared with the same period in 2000, suggest that global economic leaders such as the USA and Japan will register slower growth in the first quarter. This casts a shadow over Thailand's export hopes, reducing Q1 growth prospects to minimal or none. Slacking exports could continue until the second quarter, as the US economy is expected to pick up only later in the year.
• Slow export growth would trammel other economic sectors, especially private investment and consumption, given that international trade is a vital component of the Thai economy. Relative to GDP (at constant prices), the proportion of exports (64 percent) and of imports of goods and services (47 percent) has remained fairly high. However, economic activities are expected to move much slower in the first half this year.
• Taking into account seasonal patterns, TFRC found that both consumption and investment usually go up in the second half, while public sector expenditures usually increase in the third quarter of the calendar year, which is the last quarter of the fiscal year. These patterns, in addition to falling exports, could raise pressures on Thailand's GDP growth in the first half.
• Given these trends and estimates, TFRC projects between -0.5 and 1.0 percent economic expansion in the first half, with a yearly record ranging from 3.0 to 3.5 percent. This forecast is based on the assumption of an economic recovery in the USA in the 3rd quarter, which would buoy up Thai economic growth in the remaining period. (If the US fails to pull through, Thailand's annual growth record could fall below 3.0 percent). The above yearly projection has been downgraded from a prior TFRC forecast of 3.8 - 4.2 percent. Problems in the export sector can have a domino effect on unemployment in the manufacturing sector, with slower growth of investment. As exports fall off and the manufacturing sector functions at only 60 percent capacity, demand for investment could fade this year. With public investment projects still in the pipeline for FY 2002, investment in Thailand is likely to drop again. Consumption is also expected to be very cautious as the general public faces slower economic expansion and unemployment worries.

Quarterly GDP in 2001

Source: 1999-2000: the NESDB Forecasts, and 2001 forecasted by the TFRC

• The TFRC predicts that slower economic expansion, a decreasing current account surplus and continuing deficit in the balance of payments will put more pressures on the baht. For the remainder of the year, TFRC expects the baht to hover around THB 42.5-45.0 per dollar. The annual average will be THB 43.5-44.0 per dollar, compared with last year's record of THB 40.2 per dollar. The weaker currency can yield some positive results. Thailand's balance of trade and the nation's current account will rise in baht terms, which will reduce the adverse effects of losses among other GDP components.
• As for other public policies, TFRC expresses strong support on several issues now at the top of the government agenda to buoy up the national economy. These include the possibility of a FY 2002 budget deficit, likely to reach 2.5-2.7 percent of GDP. More stimulus packages are also expected soon. Tighter import controls will be enforced as government agencies and state enterprises review projects with high import contents. The hefty NPL burdens among local financial institutions will be lifted through establishment of the Thailand Asset Management Corporation (TAMC). This will be a significant step towards eradication of chronic NPL problems, which will lead to MLR reduction as well.