The International Monetary Fund (IMF) released an economic outlook of Thailand in 2009 on Friday after concluding the Article IV consultation with the Country.
Thai economy contracts 3% this year after recording a growth of 2.6% in 2008, the decline would be the first since the Asian crisis, the IMF said in a statement
The output contraction in 2009 could be limited to about 3% provided that political stability is maintained and the authorities' fiscal stimulus speedily and efficiently implemented, the IMF executive board said after the Article IV consultation with Thailand.
Thailand has been in an investment slump since 2006. Political turmoil has led to reduced business confidence and slow private investment growth. The main engine of growth for the economy has been the export sector.
Exports have contracted dramatically due to the global recession. Exports fell by about 18.5% in the fourth quarter. Manufacturing output contracted by 11%, thus bringing the level of manufacturing output to its lowest level since late 2005.
GDP fell by about 6%, thereby wiping out much of the good growth performance of the first three quarters, and leaving growth for the year at 2.5%.
The IMF said, to bring the economy back on a sustained high growth path, the Thai authorities need decisive policy implementation to support domestic demand.
In addition, a swift restoration of investor and consumer confidence through a normalization of the political situation is also needed.
The IMF directors said that the banking sector remains resilient, with limited exposure to subprime-related and structured products.
The strong initial positions of banks and strengthened supervision by the Bank of Thailand have helped the sector weather the global financial turmoil, the statement said.
IMF Directors welcomed the Bank of Thailand’s continued commitment to a flexible exchange rate system.