UTCC: Q1 growth hinges on post-flood measures

Experts believe the government should revamp the economy in next year's first quarter to avoid any severe effects on employment figures.

Thanavath Phonvichai, director of the University of the Thai Chamber of Commerce's Economic and Business Forecasting Center, yesterday said the country's economic growth will depend largely on the success of government rehabilitation measures.

If they fail, unemployment could reach 1.7%, he said.

Risk factors next year will include the fragile global economic situation stemming from the EU financial crisis, while the US and Asia may not expand at a satisfactory rate.

Dr Thanavath urged the government to help industries by alleviating economic burdens such as the oil prices and high interest rates.

He believes the central bank's Monetary Policy Committee will cut the key policy rate by 50 basis points to revive the economy by the end of the first quarter.

A centre survey of business entrepreneurs showed 74.4% of more than 700 respondents found their performances in the fourth quarter have been slower than in the same period last year in terms of both revenue and profits while costs have been rising.

The main factor affecting their businesses is the flood crisis, followed by oil prices and the global economy.

The centre reaffirmed its estimate that flood damage will shave 3.1 to 3.4 percentage points or almost 350 billion baht off the gross domestic product.

Damage will be 200 billion baht to the industrial sector, 80 billion to agriculture, 25 billion to tourism, 30 billion to trading and 6.7 billion to other sectors including transport and services.

However, taking into account damage of 500-700 billion baht to public and private assets and 100-200 billion baht to exports, the total estimate comes in at 1-1.2 trillion baht.

Sauwanee Thairungroj, the university's vice-president for research, said the government should also cover education expenses, as people will need money for home repairs after the floodwater recedes.

A recent survey showed home repairs would take up 23% of victims' household budgets. But the respondents said they need 80% of their budget for necessary items.