The World Bank inThailand Development 47891 in Partnership the World Bank's activities in Thailand and December 2008 o t h e r n e w s r e l a t e d t o d e v e l o p m e n t Global Slump and Political Uncertainty to Continue toWeigh on theThai Economy in 2009 BANGKOK ­ The global economic downturn and domestic political uncertainty may continue to weigh onThailand's growth in 2009.TheWorld Bank now predicts that the country's economy will expand by just 2 percent next year ­ the lowest rate since 1998. In addition, the Bank revised its forecast onThailand's growth in 2008 to 3.9 percent ­ down from the 5 percent it projected in April, said Mathew A. Verghis, the World Bank's Lead Economist for Southeast Asia. "The revision from 5 percent to 3.9 percent now just shows how much change the world, including Thailand, has seen since April," said Verghis. "The previous forecast was made before the fall of Lehman Brothers in September. It was certainly before all the street protests and the recent shutdown of Bangkok airports that had a significantly impact on investor confidence and tourism." The latest Thailand Economic Monitor ThiseconomicoutlookiscapturedinanewWorldBank TheWorld Bank predicts that exports will grow by only report, Thailand Economic Monitor ­ a review of 8 percent next year, compared with 19.5 percent in the Thai economy prepared twice yearly by the World 2008 and 17 percent in 2007. In addition, both private Bank.ThefirstEconomicMonitorfor2008wasreleased consumptionandinvestmentareexpectedtocontinue in April. The second is available for download at decreasing. www.worldank.or.th.OnDecember10,2008,journalists weregivenapreviewtothesecondEconomicMonitor, which included World Bank recommendations to Thailand on coping with the challenges in 2009 and beyond. Amid the political uncertainty of the last two years, Thailand has been banking on robust, double-digit export growth to drive the country's economy, compensatingforthesluggishdomesticconsumption and private investments. With the threat of a global recession looming, robust export growth may not continue in 2009. The Bank expects world trade to decline in 2009 for the first time since 1982. "The impact of the global downtown on Thailand's Mathew A. Verghis (left), Lead Economist, Southeast Asia, and real sector will be severe," said Kirida Bhaopichitr, the Kirida Bhaopichitr (right), Senior Country Economist, Thailand, Bank's Senior Country Economist for Thailand. in a media briefing on the World Bank's economic forecasts for Thailand in 2009 Continue on page 2 Page Continued from page Thai exports are expected to slow in 2009 due to sluggish world trade Fortunately, Thailand's banking sector has not been The World Bank recommends that Thailand invest; in heavily impacted by the U.S.-born global crisis. Since improvingpublicinfrastructure­toattractinvestment 1997, Thailand has taken significant steps to limit its and reduce the cost of logistics; in human capital exposure to external shocks. Over the past decade, ­ to ensure that workers have the skills needed by Thai regulators have also implemented many reform industries; and in research and development ­ to measurestocleanupthefinancialsectorandstrengthen increasethevalue-addedofThaiproducts.Inaddition, the health of financial institutions. As a result, the thegovernmentshouldcontinuetoworkonimproving country's banking sector remains stable today despite regional trade integration and modernizing business. the global uncertainty. In addition, Thailand has high These steps would reduce the cost of doing business, foreign reserves and a low debt burden, which help to encouraging businesses to expand and provide jobs reduce its vulnerability to external financial shocks. for the Thai people. With relatively little impact thus far from the global Suchimprovementsmaynotbepossiblewithoutstrong financialcrisis,aswellasrelativelystablemacroeconomic commitment from all sides, both in government and conditions,Thailandhasroomtoadjusttothechanging in the private sector. In addition, political uncertainty global environment. If Thailand properly manages and unclear policy direction, if continued in 2009, will this opportunity, it will be well placed to take good further weigh on the Thai economy, the World Bank advantage when international growth resumes, the warned. World Bank said. "It is crucial to encourage more private investment, but "Both the Thai government and private sector should investors may still be reluctant to invest," said Verghis. take this opportunity to improve competitiveness and "Investors normally want to see a stable political prepare Thailand to take full advantage of the global environment and clear policy direction before they gain recovery, which is expected to be in 2011 or 2012," enough confidence to start investing again." Kirida said. East AsiaWon't Be Spared Impacts of Global Economic Storm, SaysWorld Bank Report TOKYO ­ While East Asian countries have entered the East Asia & Pacific Update, released on December 10, current crisis substantially better prepared than they 2008, forecasts that real GDP growth in developing wereforthe1997Asianfinancialcrisis,nonehavebeen East Asia* will slow to 6.7 percent in 2009 from 8.5 spared the full fury of the global economic storm, says percent in 2008. And the GDP growth forecast for the World Bank's latest six-monthly assessment of the East Asia as a whole (that includes all developing East Asia & Pacific region's economic health. economies as well as Korea, Singapore, Hong Kong In the face of weakening export growth and reduced and Malaysia) will be down to 5.3 percent in 2009 levels of investment and consumption, the latest from 7.0 percent this year. Page 2 Mr.Adamssaiddespitetheglobaldownturn,theWorld BankprojectsthatEastAsiawillcontributeaboutathird of total global growth in 2008. Whilesoberinginitsforecastfor2009,thereportstates that the countries which have entered this crisis with low debt burdens, surpluses in their fiscal and external current accounts and large external reserves will have the most room to maneuver as the crisis unfolds. "Despite the difficult road ahead, those countries that sustain the sound policies pursued thus far and tackle new challenges decisively will be the ones to emerge in a strengthened position when the global economy begins No country is spared the full fury of the global economic storm, the World Bank says torecover,"saidVikramNehru­ theWorldBank'sChief Economist for East Asia and the Pacific. The report notes that the downside risks to East Asia The report warns that the region's most vulnerable are substantial in the near term but highlights that countries are those with more open capital accounts, countries will be better positioned to deal with the large non-resident holdings of equities, and a strong crisis if they are able to maintain macroeconomic reliance on foreign portfolio investment. stability, shift exports to faster growing regions in the Low income countries (Lao PDR, Cambodia, PNG, world, substitute external with domestic demand, Timor-Leste, and small island states in the Pacific), on and continue with structural reforms to strengthen the other hand, have not been affected as much from competitiveness. thefinancialturbulencebecausetheirbankingsystems World Bank Vice President for the East Asia and Pacific arelessexposedtoglobalmarkets,buttheytoowillbe regionJimAdamsapplaudedEastAsiangovernments impactedbylowercommodityexportearnings,tourism fortheirswiftandeffectivepolicyinterventionstoavert receipts, and remittances from overseas workers. the worst impacts of the global crisis so far. Poverty rates are likely to fall further in 2009, declining "Thanks to the quick action of policy makers from to 10.68 percent for developing East Asia as a whole, virtuallyeveryEastAsiancountry,bankingsystemshave comparedwiththe10.36percentprojectedearlierthis beenabletodealwiththecrisissofarandinanumberof year. While the number of poor people in the region countries, economic stimulus packages are being put in will continue to decline, an estimated 5.6 million more place," Mr. Adams said. "These actions are helping East people would have emerged from poverty next year if Asia continue to play a key stabilizing role and act as a not for the slump. growth pole for the global economy." Countries that are able to maintain macroeconomic stability, find new markets, spur domestic consumption, and continue with structural reforms to strengthen competitiveness will be better positioned to deal with the crisis *DevelopingEastAsiaincludesChina,Indonesia,thePhilippines,Thailand,Vietnam,Cambodia,LaoPDR,Mongolia, Papua New Guinea and the island economies of the Pacific. Page Recent Events November 13 ­ Dr. Johannes Heister, the World November 21 ­ Students and lecturers from Ubon Bank's Climate and Carbon Finance Coordinator for Ratchathani University listened to Shabih Ali Mohib, East Asia and Pacific, presented "Carbon Finance at a World Bank economist and public financial the World Bank and the Negotiations for a Future management specialist, during the World Bank Open ClimateChangeRegime"tomorethan50government House.TheOpenHouseisaregularevent,organizedby officials, academic researchers and professors, and theWorldBankPublicInformationCenter,tohelpvisitors representatives of the private sector in a seminar at learn more about issues in international development the World Bank office, Bangkok. and aboutWorld Bank support toThailand's social and Dr. Heister has worked on the methodologies for economicprogress.Alluniversitiesarewelcometovisit many greenhouse gas mitigation projects supported the Bank. To arrange a visit, please contact the Bank's by the World Bank. He was involved in the design of Public Information Assistant, Buntarika Sangarun, at international policy on trading of greenhouse gas (02) 686-8300 or email bsangarun@worldbank.org. emission reductions and has played a significant Otherwise please log on to theWorld Bank website for role in designing the Carbon Partnership Facility. future announcement on Open House events. His presentation is available for download at www.worldbank.or.th. Page