Bangkok: Thailand's finance ministry cut its growth forecast for 2011 as the nation's worst flooding in almost seven decades combined with faltering global demand caused to shrink industrial output in the past three months.
The economy will expand 1.1 per cent this year, down from a November forecast for growth of between 1.7 per cent and 2 per cent, Somchai Sujjapongse, head of the ministry's fiscal policy office, said yesterday.
The government expects Southeast Asia's second-largest economy to contract this quarter after the floods in recent months shut thousands of factories. The disaster became an added impediment to Thailand's growth as the European debt crisis threatens Asian exports.
"The situation got worse in November, with massive supply disruption from floodwaters," said Kampon Adireksombat, a senior economist at Tisco Securities Co. in Bangkok. "We expect manufacturing to slightly improve this month, but the full recovery will take time, possibly in the second quarter next year."
Global slowdown
"The manufacturing sector is expected to slow down in the first quarter and will pick up in the second quarter," Aphiwat Asamaporn, deputy director-general of the Office of Industrial Economics, said. "The risk factor next year is negative signs in the global economy. This will limit growth in exports, which will affect manufacturing."
Thailand's economy may grow 5 per cent next year, buoyed by government spending on post-flood reconstruction and wage rises, said Somchai from the finance ministry.
"The government needs to be the key driver for economic growth next year," he said. "We have to take the lead on investment, so the private sector can follow."
Sharp decline
Thailand's industrial production index dropped 48.6 per cent from a year earlier, after a revised 30.1 per cent contraction in October, the Office of Industrial Economics said in a statement yesterday. The decline was the biggest since at least January 2000, the earliest data available on Bloomberg.
Industrial output may fall 29 per cent in December and between 9 per cent and 10 per cent for the full year, Aphiwat Asamaporn, deputy director-general of the state agency, said at a media briefing in Bangkok.
