Thai economy slows but not due to coup.

Much of the reporting about the impact of Thailand's September 19, 2006 military coup on the country's economy has been uncritical. For the first half of 2006, GDP was initially reported to have grown 5.5 percent when compared with the same period in 2005. The government recently revised this estimate downward to 5.3 percent for the first half. The figures were reported by the Associated Press (AP) on November 23, 2006.

Third quarter 2006 results showed GDP growing 1.5 percent above second quarter 2006 results (1.1 percent). According to a Reuters December 4, 2006 filing, third quarter 2006 results were the fastest rate of growth since the third quarter 2005 when the Thai economy grew 1.9 percent.

On an annualized basis, third quarter 2006 results amounted to a GDP rate of growth of 4.7 percent.

The coup did have an effect on some mainstream expectations. For example, the International Monetary Fund (IMF) estimated Thai GDP growth at 5.0 percent in September 2005, and the same again in April 2006. When the IMF looked at Thailand in September 2006-with estimates published before the coup-it forecast 2006 growth at 4.5 percent.

In April 2006, the IMF forecast 2007 Thai growth at 5.4 percent, and in September 2006, hopes had fallen to 5.0 percent.

The most severe loss of confidence expressed by a mainstream forecaster-that Market: Asia Pacific could find-was that of the Asian Development Bank (ADB). The ADB said in an undated update to its April 2006 forecast for 2007, that Thai growth was "downgraded sharply to about 4 percent from 5.5 percent."

None of this "slowing" though was directly blamed on the military coup. In fact, the Financial Times (London) was almost cheery about it. The first line of its December 5, 2006 piece was, "Who's afraid of military coups?"

The story went on to report foreign investment in Thai equities of us$600-million since the coup, "booming exports," and a possible restart of stalled, large scale infrastructure projects, such as the three new us$4.3-billion Bangkok subway lines. The ADB says none of that money will be spent in 2006.

The ADB, though, in keeping with its pessimistic GDP forecasts, emphasized that consumer confidence was falling precipitously. Worries about high oil prices at the beginning of the year were replaced by worries about the military coup. Since January of 2004, consumer confidence has been cascading down from positive index readings well into the negative range. The span of the decline straddles both the military coup, and the spike and then decline in oil prices.

It is likely that Thailand's consumers, having suffered with government corruption and mismanagement for years, are not soon to be convinced that better times are at hand.

COUNTRY FOCUS: