Date: 4 May 2011
The event will be held in Bangkok, Thailand, with the participation of distinguished participants from academia, government, civil society, international organizations, and the press. The list of well known participants making opening remarks, presentations and commenting on the publication includes:
Chief Economist and Director
Macroeconomic Policy and Development Division
Country briefing note <download pdf file>
Economic growth is led by a revival in exports and robust domestic demand
After a 2.2% contraction in 2009, the economy grew robustly by 7.8% in 2010 – boosted by a revival in merchandise exports and decisive policy responses, including a record low policy rate and an estimated fiscal stimulus of 3% of GDP.
With some time lag, private consumption and investment eventually began to expand from the second quarter and remained robust despite the political instability in May. Services were hit hard, however, albeit temporarily, with hotels and restaurants posting a sharp drop.
Growth decelerated in the third quarter, owing to slowing demand for exports and a drop in agricultural production due to bad weather and plant diseases.
The economy picked up again in the fourth quarter owing to the continued strong performance of the major trading partners in Asia and a steady high level of future orders for key exports items.
In 2011, Thailand is expected to see growth moderate to 4.5%. Recent floods in the South of the country may have some dampening effect on this growth.
Inflation is picking up, amid concerns over rising food and oil prices
Inflation picked up to 3.3% in 2010 and is expected to accelerate slightly this year.
Food prices increased across South-East Asia in 2010, partly due to lower agricultural output caused by adverse weather conditions. Entering into 2011, continued increase in global oil prices is a growing concern.
In several economies including Thailand , the steady appreciation of local currencies has helped to contain imported inflation, including in commodity goods.
Fiscal policy continues to support the economy, with greater focus on the poor
A number of countries, including Thailand , introduced a second stimulus package following the initial one launched in early 2009. Thailand 's large fiscal support programme known as “Strong Thailand (TKK)” focuses on infrastructure, agriculture, education and health. It is estimated to have added some 2.3 percentage points to economic growth in 2010 and is expected to continue to contribute to growth in 2011.
To finance such programmes, the Government may need to cut down on a number of tax breaks and allowances, particularly those favouring the relatively wealthy.
Monetary stance gradually tightens up
As inflationary pressure increased, Thailand raised its policy rate six times between July 2010 and April 2011 by a total 150 basis points.
Further tightening could take place, but with concerns that higher interest rates could attract even greater capital inflows leading to further appreciation of the baht and that growth in the key export markets remains subdued, a careful balancing act is needed.
Boosted by strong foreign capital inflows, South-East Asian stock exchanges were among the best performers in the Asia-Pacific region in 2010. Thailand 's stock market surged by 41%.
Exports remain strong despite a stronger currency
Thailand maintained a current account surplus of about 4.6% in 2010, with exports and imports both growing rapidly.
To limit exposure to short-term foreign capital, Thailand reinstated a tax on foreign investors' capital gains and interest from bonds issued by the Government, State-owned enterprises and the central bank in October.
The Thai baht gained 11.0% against the dollar in 2010, raising concerns about losing competitiveness. The export slowdown in the third quarter, however, was more due to weaker global demand. Nevertheless, as certain sectors and small business exporters were hit harder than others, support measures were introduced.
On the positive side, currency appreciation could tame imported inflation and provide an opportunity to develop the domestic market and replace old plants and machineries to boost productivity.
Continued effort is needed to address vulnerable employment and poverty
While unemployment has fallen to pre-crisis levels in many countries in South-East Asia , the formal sector has seen less improvement, as many of the workers who had been laid off were absorbed by the informal sector during the crisis.
The informal sector, however, suffers from lower productivity, lower wages, poorer working conditions and minimum levels of social protection. This has serious implications not only for poverty but also for future growth potential.
Therefore, human resources and skills development—including strengthened education, technical and vocational training and lifelong learning—are vital for sustained dynamism.
Such efforts will also help to tackle high youth unemployment. Thailand 's youth unemployment rate was 3.6 times higher than the total unemployment rate in 2009.
Moreover, considering that labour is one of the few assets of the poor, creating more and better jobs will help the poor to earn their way out of poverty.
In this regard, economic policies should be tailored towards expanding opportunities for poor workers to move into better jobs in the formal and nonagricultural sectors.