Economy may be headed for another recession

BANGKOK (AFP): Thailand risks heading into another recession unless monetary policy is eased in the face of a slowing economy, ING Barings said in a report released yesterday. The merchant bank downgraded its growth forecast for 2000 to 4.0 percent from 4.8 percent, a day after official data clipped expected GDP expansion to 4.5 percent from an earlier goal of 5.0 percent. The central bank’s efforts to halt the baht’s slide against the greenback were “not compatible” with the weakening growth outlook, ING Barings said. “The Bank of Thailand has bewilderingly decided to prevent the baht from depreciating beyond 43.50/US$ by tightening monetary conditions,” said its senior economist Ray Farris. “We see no good economic reason for this baht defense and believe it will be an added drag on growth,” he said, adding that Thailand needs easier monetary conditions and a weaker currency. After “awful” third quarter growth of 2.6 percent, well under expectations of more than 4.0 percent, ING Barings expected fourth quarter GDP to slow to 2.0 percent, setting the tone for a dismal 2001. “If export growth disappoints our forecast of 10.9 percent year-on-year next year, we think Thailand could dip back into recession,” the report said. ING Barings’ gloomy assessment of Thailand’s economic prospects is the latest in a series of warning notes sounded by leading banks.