Thai economy 'should grow by 2.7%'

Thai economy 'should grow by 2.7%'

BANGKOK (AFP): Thailand's economy should grow by 2.7 percent this year and at 3.5 percent in 1998, but its volatile economy could result in minimal growth of just 0.2 percent next year, reports said yesterday.

The figures are on target with conditions of an International Monetary Fund (IMF) rescue package for Thailand and are also in line with the latest government forecasts for the limping economy.

The figures, reported Monday by the Nation Daily, were released by the country's top commercial bank, Bangkok Bank plc, and were calculated using a method honed by Japan's Daiwa Institute of Research.

"Agriculture will rescue the Thai economy next year," the bank's chief economist Nimit Nontapunthawat said.

But he warned that the stringent IMF austerity conditions imposed on Bangkok in return for a US$17.2 billion financial rescue package and the plunging local currency made accurate economic predictions very difficult.

Nimit also warned that real gross domestic product (GDP) growth could drop to near zero in 1998 if the government is forced to further reduce its budget for the year, as some analysts have predicted.

The government has already shaved off 100 billion baht (US$2.07 billion) from the budget and some experts have predicted that a further 100 billion baht could also be slashed as the government battled to bring in a crucial budget surplus for fiscal 1998, ending next Sept. 30.

The IMF has laid down a strict set of conditions for the massive rescue package for Thailand, including targets for the budget deficit, GDP, current account and foreign reserves.

Last week, Deputy Premier for Economic Affairs Virabhongse Ramangkura said the Thai economic fundamentals remained firm with GDP growth seen at 5.5 percent for this year and 3.5 percent for calendar 1998.

The Bangkok Bank forecasts assumed an exchange rate of 35 baht to the dollar and interest rates of 14.5 until the end of this year and about 12.5 percent in 1998.

The baht however fell to a new record low of 38.80 in offshore trade Monday and to 37.65-75 in domestic trade.

Thailand is weathering its worst economic storm since World War II which has seen economic growth set to fall dramatically from its 1980s boom year levels. Real GDP growth in 1996 was 6.6 percent.