Flood crisis could reverse Thailand's gain
Bangkok Bank president Chartsiri Sophonpanich sees the flood crisis as a possible tipping point for the economy, causing the country to lose out on foreign investment.
"This situation has had a significant impact on the opportunity of the country to cash in on new investment by foreign investors who planned to come to Thailand," he said.
The severe flooding has dealt a huge economic blow, he told a seminar organised by the bank on the outlook for the economy and Thai businesses after the flood crisis.
Overall export volume last month expanded by 13 per cent, but for auto-parts exports dropped by 15 per cent and for electronics parts by 22 per cent, he said.
The bank had expected the country to welcome new foreign players, as investors are looking for new places to expand to and Thailand is one of them.
The global economic volatility, the tsunami in Japan and the upcoming Asean Economic Community persuaded those investors to establish a base in Asia, and Thailand was a candidate. However, the flooding broke down global supply chains, leaving foreign investors traumatised.
To restore confidence, the government has to hurry and rejuvenate the country’s appeal through water management and new measures from agencies, such as tax incentives from the Board of Investment, he added.
Executive chairman Kosit Panpiemras said GDP next year could expand by 4-5 per cent, recovering from 1.3 per cent expected this year.
The economy would still be reeling from the flood until the first quarter of next year. However, the resumption of operations by businesses could be seen in the second quarter and could offset the temporary suspension of operations in the fourth quarter of this year and the first quarter of next year, he said.
The bank's loans next year could rise by 6-8 per cent, the same as this year.
The central bank will cut its policy rate by 25 basis points in the upcoming meeting and gradually reduce it further next year. However, the central bank should not hack the policy rate to deeply because the country needs to have enough reserves to prepare for unexpected risks especially the global economy volatility. The country’s reserves have reached US$200 billion and public debt is 40 per cent of GDP, which are suitable for the country.
The government should make it a priority to increase the efficiency of solving flood-related problems, he added.
