NESDB sees trouble ahead

Thai business must prepare for a harsh economic climate next year as unemployment in major Western economies will hurt exports, says Kosit Panpiemras, executive chairman of Bangkok Bank.

"Growth will rebound in 2010, but the economic recovery will remain weak. Exports alone cannot drive the recovery,'' he said at a bank conference for its small-business clients.

Mr Kosit said the next three to four years would be fraught with risk. Growth will likely remain well below previous trends of 5% to 6% annually. This will pressure labour markets and make it harder to strengthen the supply chain.

"Thailand may be at greater risk of stagflation, particularly as interest rates begin to rise,'' he said.

Small businesses should streamline financing costs and improve quality and product development, and also develop a vision and strategy. Firms must carve out niches and foster close customer relationships for long-term growth.

Business alliances are also critical for survival, as is tight financial discipline and work processes and procedures.

Ampon Kitti-ampon, the secretary-general of the National Economic and Social Development Board, agreed that the medium-term prospects for the Thai economy were complicated by risk.

"Thailand is likely to post growth of 3% to 4% in 2010, with the economy returning to 2008 levels. This is not really much of a concern. Of greater worry is how to move forward,'' he said.

Thai growth forecasts for 2010 depend largely on the global economy, with the NESDB seeing global growth of 2.8% to 3.2%, led by China, India, Brazil and Russia. While many analysts expected the financial crisis to end this year, bank failures had continued, he said.

High unemployment in the US and other economies would also affect demand and trigger protectionism, hurting developing economies such as Thailand.

Mr Ampon said the NESDB's forecasts hinged on the government meeting spending targets for the 1.43-trillion-baht Thai Khem Kaeng programme.

Political turmoil and the suspension of projects at Map Ta Phut are other key medium-term growth risks, he said.

"Map Ta Phut will certainly have a short-term impact on the companies and contractors. Longer-term, these industrial projects are all key engines for the economy,'' Mr Ampon said.

"I do believe that Thailand can reach 3% growth in 2010. But we must stop fighting among ourselves.''