Thai Government to Spend $5.9 Billion on Economy by End of 2010

By Daniel Ten Kate and Haslinda Amin

Sept. 2 (Bloomberg) -- Thailand’s government will inject 200 billion baht ($5.9 billion) into the economy by the end of next year to bolster growth as a revival in export orders helps the nation recover from its first recession in a decade.

The spending is about a fifth of a 1.06 trillion-baht, three-year investment program on transportation, health and education projects, which will boost economic growth by as much as 2.5 percent a year, Finance Minister Korn Chatikavanij said in an interview today. Gross domestic product will expand in the fourth quarter from a year earlier as the spending kicks in this month and overseas demand improves, he said.

“Our forecast looks on solid ground,” Korn, a former chairman of JPMorgan Chase & Co.’s Thailand unit, told Bloomberg Television. “Every indication in terms of export orders has significantly improved in key sectors.”

Thailand’s benchmark stock index has surged 58 percent from this year’s low in March as companies from Hana Microelectronics Pcl to Delta Electronics (Thailand) Pcl report higher orders. The central bank has kept its key interest rate unchanged at 1.25 percent for three meetings after four cuts from December to April as a brighter global outlook bolster economic prospects.

“We have passed the bottom, but the recovery process will be gradual and take some time,” Prasert Bunsumpun, chief executive officer of PTT Plc, Thailand’s biggest energy company, said in Bangkok yesterday. “If the government can restore confidence, everything will come back.”

Australia’s economic growth unexpectedly accelerated to 0.6 percent in the second quarter on consumer spending, according to a Bureau of Statistics report today.

‘Stimulative’ Spending

Thailand’s planned government stimulus totals about 15 percent of GDP, Korn, 45, said.

“It will hit the economy in the month of September and onwards,” he said. “We have reason to be confident that it will be stimulative and lead to improved GDP growth later.”

The economy shrank 4.9 percent in the second quarter from a year earlier, after contracting 7.1 percent in the previous three months, the government said Aug. 24. GDP may decline as much as 3.5 percent in 2009 before expanding as much as 3 percent next year, it predicts.

Southeast Asia’s second-largest economy grew 2.3 percent in the second quarter from the previous three months, and may expand at a “similar” pace this quarter, Korn said.

Political turmoil since a 2006 coup has compounded Thailand’s economic woes as rival demonstrators seized airports, streets and government buildings in the past year. Anti- government protesters have pledged to continue targeting Abhisit, who they say lacks a popular mandate to govern.

Election Schedule

After his opponents forced the cancellation of an Asian summit in April, Abhisit set up a panel to recommend constitutional changes and said he wouldn’t call a new election until they were approved. Korn said his ruling Democrat party, which Abhisit heads, was “not stuck on that issue” and the timetable for amendments is not tied to a new election.

“Ideally, from an economic perspective, we want to be in position at least for another year in order to make sure our key policies are implemented before a general election is called,” he said. “That should give us sufficient time for political reform.”

Korn is “confident” his party’s key coalition ally Bhum Jai Thai, which left the previous government last year to shift power to Abhisit, is “on board” and won’t leave to trigger a new election. The Democrat party hasn’t won the most seats in an election since 1992.

“Our recovery will be very fast if we have political stability,” said Anant Asavabhokhin, president of Land & Houses Pcl. “The economy will turn around very quickly if people feel secure and come out to eat food and start spending.”

To contact the reporter on this story: Haslinda Amin in Singapore at hamin1@bloomberg.net; Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net