Bloomberg News

Thai Floods Sap Confidence as 2011 GDP Growth Forecast Slashed

November 10, 2011

Nov. 10 (Bloomberg) -- Thai economic forecasters said floods that have swamped factories and displaced millions over the past month may crimp gross domestic product growth this year to as little as 0.5 percent if all of Bangkok is inundated.

Thailand’s consumer confidence dropped for a third straight month in October, slumping to the lowest level in a decade, the University of the Thai Chamber of Commerce said today. The economy may grow between 0.5 percent and 1.5 percent this year if floods reach all of Bangkok’s 50 districts, according to economist Thanavath Phonvichai.

“Confidence may fall further this month as people are still concerned about the wider flooding area,” Thanavath, the university’s economic forecasting director, told reporters today. “The steep fall showed that people are shocked about what has happened. Economic activities are stalled.”

Thai officials are aiming to prevent the floods from further damaging the economy after swamping seven industrial parks with 891 factories north of the capital, disrupting global supply chains. Bangkok officials are trying to prevent floodwaters from cutting off a key road linking the capital with southern resort areas including Hua Hin, where many people have fled to escape the disaster over the past month.

Waters bubbling up through the city’s drainage system are set to reach Rama II road in the southwestern corner of Bangkok today, according to Jate Sopitpongstorn, an adviser to Governor Sukhumbhand Paribatra.

“There is hope the road will be flooded but not cut,” Jate said by phone. “They hope to control the level of water.”

Stocks Fall

Thailand’s benchmark SET Index, which has risen 4.3 percent over the past month, fell 0.5 percent at the midday break. The baht weakened 0.4 percent to 30.83.

The Bank of Thailand last month slashed its 2011 economic growth forecast to 2.6 percent from 4.1 percent. Credit Agricole CIB cut its GDP forecast this year to 2 percent from 4.5 percent, according to a report today by senior strategist Frances Cheung, who predicted the central bank would cut its benchmark interest rate on Nov. 30.

Prime Minister Yingluck Shinawatra yesterday said GDP expansion would miss an earlier target of 3.5 percent to 4 percent this year and may grow between 4.5 percent and 5.5 percent in 2012 with inflation as high as 4 percent. The university forecasted Thai GDP growth next year at 4 percent to 5 percent, Thanavath said.

Confidence “may swing back in December if the government can drain water and start the reconstruction quickly,” he said, adding that most of the nearly 700,000 people temporarily out of jobs would find work again quickly due to a tight labor market.

Rebuilding Budget

Yingluck has proposed spending 130 billion baht ($4.2 billion) to help flood victims and rebuild damaged roads, bridges and buildings. She has also set up committees to develop a long-term water management plan.

Waters continued rising around Bang Chan and Lad Krabang, two industrial estates in eastern Bangkok with 322 factories. Companies including Nestle SA, Honda Motor Co. and Isuzu Motors Ltd. installed sandbags, plastic tarps and water pumps around their operations to keep floodwaters at bay.

Bang Chan “has good protection, so I still believe we can protect it at a certain level,” Yingluck told reporters today. She plans to attend a regional summit in Bali next week that will include U.S. President Barack Obama.

“People have chosen me to do the job,” said Yingluck, who came to power in August after her party won a majority in national elections the previous month. “I will do the best I can to pay back for all the votes.”

Bangkok officials have announced evacuations in 18 of the city’s 50 districts. The government is using pumps and canals to prevent water in northern Bangkok from draining into the main business areas of Silom and lower Sukhumvit.

--Editors: Tony Jordan, Mark Williams

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net

To contact the editor responsible for this story: John Brinsley at jbrinsley@bloomberg.net


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