Bloomberg News

Thai Confidence Rises First Time in 5 Months on Flood Aid

January 12, 2012

(Updates with economist’s comment in fourth paragraph.)

Jan. 12 (Bloomberg) -- Thailand’s consumer confidence rose for the first time in five months in December as the government took steps to aid a recovery from the worst flooding in almost 70 years.

An index measuring sentiment increased to 63.1 from 61.0 in November, the University of the Thai Chamber of Commerce said in a statement in Bangkok today. The gauge is based on a survey of 2,242 respondents.

The Cabinet earlier this week approved a plan for 350 billion baht ($11 billion) in investment for water management projects to prevent future floods on top of 120 billion baht in planned spending to rehabilitate the economy. Thailand’s economy may have contracted 5 percent last quarter from a year earlier, according to the finance ministry, after floods that spread across the country in recent months killed more than 700 people and shut thousands of factories.

“The government’s measures to rebuild and compensate flood victims helped boost confidence,” Thanavath Phonvichai, an economist at the university, told a news conference in Bangkok today. “Still, it will take time for consumer spending to fully recover, possibly in the second quarter.”

The university expects the economy to grow 4.7 percent this year, Thanavath said. Consumer confidence may fall in January and February because of higher energy prices, he said.

The Finance Ministry last month cut its 2011 growth forecast to 1.1 percent from as much as 2 percent predicted in November after the floods led to the sharpest decline in manufacturing in more than a decade.

The Bank of Thailand cut its benchmark interest rate by a quarter of a percentage point to 3.25 percent on Nov. 30. It predicts 4.8 percent economic growth in 2012, spurred by reconstruction and as factories run by companies from Honda Motor Co. to Western Digital Corp. return to normal operations.

“Economic problems in Europe remain the key risk factor this year,” Thanavath said. “Still, the economy is expected to grow significantly in the second quarter because of government spending and wage rises.”

--Editors: Patrick Harrington, Tony Jordan

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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