Cyclical problems beset Thai economy.

When Market: Asia Pacific published its most recent analysis of Thailand's consumer market prospects (in "Country Focus", April 2005, 14:4) it was clear that drought had negatively impacted growth. At that time, the government was talking about initiating a broad program of infrastructure projects to support the economy's growth, and provide incentives for foreign investors to become more involved in the economy.

At this writing, the government is talking about initiating a broad program of infrastructure projects to support growth.

What has changed, though, is the pessimism evident in analyses of growth for the year. According to a June 24, 2005 story in The Bangkok Post (Bangkok), the government's forecast of GDP growth is between 4.5 percent and 5.5 percent. A June 3, 2005 Bloomberg News story said the economy probably contracted in the first quarter 2005.

The International Monetary Fund's (IMF) published Thailand GDP growth forecast for 2005 is 6.4 percent. This statistic is part of the IMF's World Economic Outlook Database, dated September 2004 -- before the tsunami struck, and before the impact of the drought was assessed.

Other authoritative Thai GDP forecasts include a June 22, 2005 analysis that appeared on Morgan Stanley's Global Economic Forum Website. The posting not only offered a 5 percent GDP forecast with the disclaimer that it could be revised downward, but also some clarity on the government's infrastructure programs.

Morgan Stanley says the earlier program focused on what was termed "final" infrastructure projects (example: Bangkok mass transit). The current revision focuses on "intermediate" infrastructure (example: urban and rural economic centers designed to attract investment). The two essential differences between "final" and "intermediate" projects being the length of time to completion, and the size in public investment - with "final" projects in the longer, more expensive categories.

The new infrastructure plan calls for spending US$42.5 billion from 2005 through 2009, according to a June 15, 2005 International Herald Tribune (Neuilly Cedex) story. Morgan Stanley says none of this spending will begin until the fourth quarter 2005, and even that will be sparing.

So where do Thai consumers fit in all of this?

The Thai economy's first half 2005 fizzle is considered "cyclical" - that is not so bad. The rains will come again, oil prices will recede (but not so far), the global economy will improve, and Thai exports will once again be in demand.

Meanwhile, according to the above referenced Post story, domestic consumption will increase 4.5 percent this year, down only slightly from 2004, even though, says Bloomberg, April consumer confidence was at its lowest in two years. The reason for the small drop is that consumers have somewhat backed off buying durables - even though interest rates are low.

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