World Bank forecasts 3.7-per-cent growth for Thailand in 2011

Apr 5, 2011, 5:20 GMT

Bangkok - The World Bank on Tuesday predicted Thailand's gross domestic product would expand 3.7 per cent this year, a revision upward from its previous forecast of 3.2-per-cent growth.

But the World Bank warned that the economy was still at risk from rising oil prices and inflation.

'If oil prices were to continue to increase, it would have a negative impact in the second half of the year,' said Frederico Gil Sander, the World Bank's country economist for Thailand.

But if prices stabilize at their current rates, about 110 dollars per barrel, Thailand stands to gain from higher prices on its petroleum-related exports and increased domestic consumption because of higher farmers' incomes, Sander said.

Exports remain the main engine of growth for Thailand's economy, accounting for 69.5 per cent of the country's gross domestic product (GDP) in 2010, according to the World Bank.

Thailand's exports jumped 28.1 per cent last year, helping to boost GDP by 7.8 per cent.

'Today, Thailand exports more automobiles, more agricultural products and more petrochemical products compared to before the [2008 global economic] crisis, and the prices of these products have been going up more quickly than other goods,' Sander said.

The price increases for Thailand's other top exports from labour-intensive industries such as electronics, electrical appliances and garments have not been as high.

The rise in prices of agricultural products would benefit Thai farmers this year but would also add to the hardships suffered by the urban and rural poor, the bank said.

'On the domestic side, the high agricultural products prices actually benefits the Thai economy as a whole since Thailand is a net agricultural producer,' Sander said. 'This will promote domestic consumption.'

The World Bank warned that the Thai government, which is planning an election in the middle of the year, might reconsider its policy of subsidizing domestic diesel oil prices and retarget such expenditures on helping the poor deal with inflation.

'But the subsidies don't pose a large fiscal risk for Thailand because the absolute level of Thailand's debt levels has been quite low,' Sanders said.

Inflation as of last month was 3.1 per cent, low by regional standards.