Thailand’s Korn Says Economy May Shrink More Than 3%

By Shanthy Nambiar and Haslinda Amin

April 14 (Bloomberg) -- Thailand’s Finance Minister Korn Chatikavanij said the government will lower its forecast that the economy will contract 3 percent this year as anti-government protests disrupt tourism and investment.

The size of the cut to the forecast will depend on how long it takes to return the country to “normalcy,” Korn said today in a Bloomberg Television interview. Protests have made reviving the economy a harder task, he said.

Southeast Asia’s second-largest economy may shrink as much as 3 percent this year as exports slide and unemployment climbs, Korn said last week. Overseas sales, which make up 70 percent of Thailand’s gross domestic product, have fallen for four straight months as demand for Asia’s electronics and other goods plunges.

Clashes with troops in Bangkok yesterday left two dead and at least 97 people injured and led Australia and Britain to warn their citizens to avoid Thailand. The clashes came one day after the government declared its third emergency decree since September.

The prospect of prolonged unrest threatens to deter foreign investment just as the Thai economy confronts its first annual contraction in 11 years.

“The costs of this political turmoil are rising and economy will be hit badly,” said Tetsuji Sano, a Singapore- based economist at Nomura Holdings Inc. “Foreigners are losing confidence, companies will be more reluctant to invest and tourists will choose go somewhere else.”

Spending

Moody’s Investors Service and Standard & Poor’s yesterday said they may lower the nation’s foreign-currency debt ratings as the continued political instability hurts tourism revenue and spurs capital outflows.

The government plans to proceed with its spending plans this year, Korn said today. There is no threat that the government will lose control of the security situation in Bangkok, he said.

Thailand has said it will spend about 1.57 trillion baht ($44.5 billion) over three years, mainly on infrastructure projects, to help create jobs and spur economic growth. That is in addition to an earlier 116.7 billion-baht stimulus package of public works, training programs, cash handouts and tax breaks.

To contact the reporters on this story: Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net;