Thailand star performer of ASEAN

Thailand star performer of ASEAN

Sarah Stewart, Agence-France Presse, Bangkok

Thailand has become Southeast Asia's economic star performer,
with growth of up to 6.25 percent forecast this year in an
impressive turnaround since the dark days of 1997 when the
devaluation of the baht sparked Asia's financial crisis.

Backed by a bull run on the stock market which is being
powered by an avalanche of foreign funds, a resurgent real estate
sector, a strong baht and rising exports, Thailand's growth rate
now ranks second only to China.

The big-spending fiscal policies of Prime Minister Thaksin
Shinawatra's populist administration, much criticised after he
swept to power in 2001, are credited with kicking off the
recovery.

"Their policy has been fairly pro-active, and the currency
depreciated very substantially during the crisis so that gave
them a good starting point," said ABN Amro Asia's Hong Kong-based
economist Eddie Wong.

"At the same time there was less damage to the economy as
compared to the Philippines and Indonesia," he said. "In
economies like Hong Kong and Singapore they are still having some
difficulties adjusting."

Although there are fears of a bubble emerging in the
overheated real estate sector, and concerns over destabilising
short-term punting on the stock market, economists believe
Thailand's recovery is generally built on firm foundations.

"If you look at the fundamentals, they have an improving
current account surplus, investment is starting to shift from
public to private, consumption is still fairly robust and
employment growth is broad-based," said Wong.

Thailand's bourse, which until recently struggled with poor
market capitalisation and lack of buyer interest, has been
emblematic of the change of fortune with a stunning 79.4 percent
increase over the first 10 months of 2003.

The rally has been fuelled by foreign funds ploughed in by
investors who have been priced out of more developed stock
markets. Rock-bottom interest rates have also lured retail
buyers.

"The financial sector, both the money market and the capital
market, have prospects to be on an upward trend, particularly the
stock market," said Sompop Manarangsan, an economics lecturer at
Bangkok's Chulalongkorn University.

Sompop said the bourse will continue to benefit from strong
supply with a raft of share offerings and privatisations of
lumbering state enterprises, another Thaksin initiative aimed at
boosting market capitalisation.

"Besides China, I think the prospects of the Thai economy are
relatively better than all the countries in this region when we
see several factors from both the real sector and the financial
sector," he said.

Thaksin's economic management and the political stability that
has come with his overwhelming control over parliament has also
boosted investor confidence despite initial doubts over his
government's commitment to financial reforms.

However, Wong said Thailand's neighbours were snapping at its
heels and looked set to catch up fast in terms of economic
expansion.

"The rest of the region is also picking up, Thailand is just
something like 12 or 18 months earlier than some of its
neighbours," he said.

Sompop also sounded a note of caution about a looming bubble
centred on the real estate market, one of the weak points in the
economy that sparked Thailand's economic descent in 1997.

"This may erode Thai fundamental factors in the longer term,
if we do not take more precautions over this kind of speculative
bubble expansion," he said, adding that some sectors of domestic
consumption were also overheating.

"We could not avoid this bubble emerging in the upward-moving
economy but we can handle it to ensure the boom turns into more
sustainable growth," he said.

But Sompop said that currently, agencies responsible for
macro-economic management were doing little to cool things down,
continuing to permit tools like net settlement on stock trades
which help speculative investors operate.

Thailand's central bank last week raised its growth forecast
for 2003 to between 5.75 percent and 6.25 percent from an earlier
projection of between 4.5 percent and 5.5 percent, in line with
the government's economic advisory body which last month upped
its full-year forecast between 5.8 and 6.2 percent from between
4.5 percent and 5.5 percent.

International organisations are also enthusiastic about the
Thai economy's prospects. The International Monetary Fund said in
September that it expects Thailand's real GDP growth to hit 5
percent this year.

The World Bank last month raised its 2003 economic growth
forecast to 5.8 percent from an earlier estimate of 4.5 percent,
citing a "strong and impressive" economic performance over the
past six months.