Thailand economy to grow 4% if political tensions subside - ADB

SINGAPORE (ICIS news)--Thailand’s economy could grow by about 4% this year, boosted by a rebound in exports, if the country resolves ongoing political tensions over calls for the government’s resignation, the Asian Development Bank (ADB) said in a report released on Tuesday.

"The economy is expected to recover this year, but probably at the mild pace of about 4%, even though it came off a low base. Growth is forecast to pick up to 4.5% in 2011 as exports and investment strengthens," the report.

"The forecast assumes that there would be no severe political disruptions in the next two years," the report added.

A rebound in exports that started in late 2009 would accelerate this year, boosting manufacturing production, employment and investment, the ADB said.

ADB’s forecast also took into consideration the successful outcome of the legal wrangle involving the suspension of projects worth $12bn (€8.9bn) at the Mab Ta Phut industrial estate in Thailand’s Rayong province.

Political unrest in the Thai capital Bangkok recently turned deadly after a month of mass protests by the anti-government "red shirts" protesters.

The protesters are seeking to remove Prime Minister Abhisit Vejjajiva, whom they regard as illegitimate and elitist, from power.

Vejjajiva has rejected calls to step down since protesters took to the streets on 14 March.

Industry sources in Bangkok said that the country's petrochemical production and services were fully operational despite the ongoing protests.

"There has been no impact on any of Indorama Ventures’ plants at all," said Richard Jones, a spokesperson for polyethylene terephthalate (PET) producer Indorama.

Taiwan-based expandable polystyrene (EPS) producer Ming Dih also said that the events in Bangkok had not affected its production.

Political tensions had already caused delays as meetings on investment projects were postponed, the ADB said.

"The government is likely to be cautious in approving projects and disbursing funds during periods of disruption," it said.

Despite the minimal impact from the current round of protests, continued political uncertainty in Thailand would turn away foreign investors in the long term, analysts said.

"The planned petrochemical projects are fine for now but there might be less investments coming in the next four to five years down the road due to the political issues," said Naphat Chantaraserekul, an analyst with brokerage house Kim Eng Securities.

Overall investments in the country were expected to grow by 6% this year and quicken in 2011 as a result of stronger export demand, which had boosted industrial capacity utilisation, the ADB added.

According to media reports, 17 civilians and four soldiers were killed over the weekend after the army tried to launch a crackdown on the protesters, some of whom are supporters of ex-Prime Minister Thaksin Shinawatra.

Protest leaders on Tuesday said that they would not leave the various sites they've been occupying in the capital until Vejjajiva dissolves parliament and calls for fresh elections.

They had also rejected the government’s latest offer to dissolve parliament in six months, according to media reports.

($1 = €0.74)