Thailand will continue to grapple with multiple challenges in the third quarter of 2009, as economicactivity remains depressed and the political scene unsettled. The rapid slowdown in the globaleconomy has impacted the Thai economy disproportionately due to its heavy reliance on externaldemand. Steering the economy back towards domestic demand-driven growth will not be an easyfeat. Meanwhile, the chances of political harmony still look remote, despite recent intimations byPrime Minister Abhisit Vejjajiva that elections will eventually be held. Vagueness as to when thiswould be, and over the criteria that first would have to be fulfilled, is likely to be read as a stallingtactic by opposition forces, which remain loyal to the exiled former premier Thaksin Shinawatra.Dialogue is clearly necessary, but it is hard to see how a viable compromise could be found giventhe sharp fault lines running through Thai society.Less than half a year into his tenure, Abhisit finds himself in a precarious position with many observerssuggesting that he could be out of office before long. The violent anti-government protests inBangkok and abutting areas in April, orchestrated by the red-shirted United Front for DemocracyAgainst Dictatorship (UDD) movement, left two people dead and more than a 100 injured as securityforces were deployed to quash the manifestations. The cancellation of the meeting of the Associationof South-East Asian Nations (ASEAN) in the resort-town of Pattaya was particularly embarrassingfor the PM, intensifying widespread fears that the situation is beyond the government's control.While Abhisit's display of calm throughout the crisis ' his car came under attack by protestors inPattaya ' may have earned him some kudos within the government, there is little doubt that he isunder serious pressure both internally and externally.Although there has been a great deal of talk about incipient 'green shoots' heralding a recovery, weremain unconvinced as to the likelihood of a swift rebound in the economy. Heavy dependence onexports in conjunction with seemingly ceaseless political turbulence has put a serious dampeneron growth, hurting key sectors such as manufacturing and tourism. The latter has been batteredheavily, with foreign arrivals more than halving on a year-on-year (y-o-y) basis in Q109 and tourism-related businesses experiencing a sharp fall in revenues. Granted, the Thai authorities havenot been sitting on their hands, with both monetary and fiscal stimulus measures working theirway through the system. The government's three-year THB1.43trn stimulus package ' assumingthat it can push through the attendant borrowing plans ' should bring some relief, but is not likelyto offset the manifest slack in the private sector in the short term. In view of the dim backdrop, andcontinued negative data, we have revised down our 2009 GDP forecast from -2.5% to -4.5%.The volatile political situation is a clear deterrent to foreign investors, as evidenced in fairly sharp fallin direct investment inflows going into 2009. However, while there are question marks surroundingits longevity, businesses are likely to be satisfied with the Democrat-led administration, which iscommitted to market-friendly policies. Indeed, the fiscal stimulus planned for the next few yearsis focused very much on productivity-enhancing areas such as infrastructure and education, allof which need to be improved if Thailand is not to fall behind low-cost competitors such as Chinaand Vietnam.

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Thailand Business Forecast Report Q3 2009
Published on June 2009
Report Summary
Thailand will continue to grapple with multiple challenges in the third quarter of 2009, as economic
activity remains depressed and the political scene unsettled. The rapid slowdown in the global
economy has impacted the Thai economy disproportionately due to its heavy reliance on external
demand. Steering the economy back towards domestic demand-driven growth will not be an easy
feat. Meanwhile, the chances of political harmony still look remote, despite recent intimations by
Prime Minister Abhisit Vejjajiva that elections will eventually be held. Vagueness as to when this
would be, and over the criteria that first would have to be fulfilled, is likely to be read as a stalling
tactic by opposition forces, which remain loyal to the exiled former premier Thaksin Shinawatra.
Dialogue is clearly necessary, but it is hard to see how a viable compromise could be found given
the sharp fault lines running through Thai society.
Less than half a year into his tenure, Abhisit finds himself in a precarious position with many observers
suggesting that he could be out of office before long. The violent anti-government protests in
Bangkok and abutting areas in April, orchestrated by the red-shirted United Front for Democracy
Against Dictatorship (UDD) movement, left two people dead and more than a 100 injured as security
forces were deployed to quash the manifestations. The cancellation of the meeting of the Association
of South-East Asian Nations (ASEAN) in the resort-town of Pattaya was particularly embarrassing
for the PM, intensifying widespread fears that the situation is beyond the government's control.
While Abhisit's display of calm throughout the crisis ' his car came under attack by protestors in
Pattaya ' may have earned him some kudos within the government, there is little doubt that he is
under serious pressure both internally and externally.
Although there has been a great deal of talk about incipient 'green shoots' heralding a recovery, we
remain unconvinced as to the likelihood of a swift rebound in the economy. Heavy dependence on
exports in conjunction with seemingly ceaseless political turbulence has put a serious dampener
on growth, hurting key sectors such as manufacturing and tourism. The latter has been battered
heavily, with foreign arrivals more than halving on a year-on-year (y-o-y) basis in Q109 and tourism-
related businesses experiencing a sharp fall in revenues. Granted, the Thai authorities have
not been sitting on their hands, with both monetary and fiscal stimulus measures working their
way through the system. The government's three-year THB1.43trn stimulus package ' assuming
that it can push through the attendant borrowing plans ' should bring some relief, but is not likely
to offset the manifest slack in the private sector in the short term. In view of the dim backdrop, and
continued negative data, we have revised down our 2009 GDP forecast from -2.5% to -4.5%.
The volatile political situation is a clear deterrent to foreign investors, as evidenced in fairly sharp fall
in direct investment inflows going into 2009. However, while there are question marks surrounding
its longevity, businesses are likely to be satisfied with the Democrat-led administration, which is
committed to market-friendly policies. Indeed, the fiscal stimulus planned for the next few years
is focused very much on productivity-enhancing areas such as infrastructure and education, all
of which need to be improved if Thailand is not to fall behind low-cost competitors such as China
and Vietnam.
Thailand Business Forecast Report Q3 2009 Page 1/5

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Table of Content
Executive Summary... 7
Not Out Of The Woods Yet
Chapter 1: Political Outlook 9
SWOT Analysis......9
BMI Political Risk Ratings....... 10
Domestic Politics.....11
Reconciliation Still Some Time Away
Although the sharp tensions seen in April have subsided, political friction has far from vanished.
Table: Political Overview.. 11
Chapter 2: Economic Outlook....... 13
SWOT Analysis .. 13
BMI Economic Risk Ratings.... 14
Economic Activity ....15
2009 GDP Forecast Dropped To -4.5%
Recent macroeconomic data do not suggest that the Thai economy is headed for a swift recovery, fiscal and
monetary stimulus notwithstanding.
Table: ECONOMIC ACTIVITY.... 15
Fiscal Policy.17
Pump-Priming Set To Continue
The challenging economic environment is manifest in the growing imbalance in the fiscal accounts, as stimulus
measures are launched at a time of ebbing revenue inflows.
Table: FISCAL POLICY..17
Balance Of Payments ..........18
C/A Surplus Secure, For Now
The external outlook remains dim, as reflected by continued sharp contractions in exports to key trading partners.
Table: BALANCE OF PAYMENTS......... 18
Key Sector Outlook..20
Tourism Feeling Recessionary Pangs
The important tourism sector has been heavily affected by the slowdown in the global economy and the shaky
domestic political situation.
Chapter 3: 10-Year Forecast......... 21
The Thai Economy To 2018..21
Escaping The Middle Income Trap
The Thai economy should grow reasonably robustly up until 2018 but could struggle to make a sustained departure
above trend.
table: Lo ng-Term Macroeco nomic Forecasts . 21
Chapter 4: Special Report. 25
The Outlook For Global Banking......25
TABLE: LOAN-TO-DEPOSIT RATIOS, Selected States... 25
TABLE: LOAN GROWTH, Selected States......... 26
Business Environment Rating Outlook.......28
TABLE: COMMERCIAL BANKING BUSINESS ENVIRONMENT RATINGS, SELECTED STATES 28
Chapter 5: Business Environment 33
SWOT Analysis .. 33
BMI Business Environment Risk Ratings........ 34
Business Environment Outlook.......35
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TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS... 36
Institutions ..37
TABLE: BMI LEGAL FRAMEWORK RATINGS.... 39
Infrastructure ..........40
Table: Asia, FDI Annual Inflows .... 42
Market Orientation ..42
Table: BMI TRADE RATINGS... 43
TABLE: Top Export Destinations.......... 45
Operational Risk ......46
Chapter 6: Key Sectors...... 47
Tourism ........47
Executive Summary
Thailand has marketed itself for many years as an exotic, natural, friendly and exciting destination, with tourism
infrastructure including leading five star hotels, innumerable restaurants, and one-person tour operators.
Table: Tourism ' Histor ical Data & Forecasts 48
Petrochemicals .......50
Executive Summary
Thailand's petrochemical producers were hit hard by the global economic downturn. SCG's petrochemicals division
posted a net loss of THB4.36bn, compared with net income of THB7.8bn in Q407.
Table: Thailand Petroc hemical Industry ' Histor ical Data & Forecasts ......... 54
Chapter 7: BMI Global Assumptions........ 57
Global Assumptions.57
TABLE: GLOBAL ASSUMPTIONS57
TABLE: GLOBAL & REGIONAL REAL GDP GROWTH..... 58
TABLE: EMERGING MARKETS.. 59
TABLE: COMMODITIES.. 60
Thailand Business Forecast Report Q3 2009 Page 3/5

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