ADB Sees Lacklustre Year Ahead for Thailand by Phairath Khampha 16 April 2002 Growth not enough to combat poverty Thailand's economy would remain in the doldrums in 2002 and in 2003 amid uncertain export prospects coupled with weak domestic demand, the Asian Development Bank said on April 8, 2002. The Manila-based lender said in its annual Asian Development Outlook that Thai gross domestic product would grow by 2.5% in 2002, and then pick up slightly to 3% in 2003. Both figures were well below pre-crisis growth rates, and insufficient to kick-start its stalled so-called battle against poverty. Thai GDP grew by 1.8% in 2001 compared with 4.6% in 2000. "With the external outlook uncertain and domestic private demand still constrained by a large debt overhang, GDP growth in 2002 of 2.5% is projected. Economic momentum is expected to strengthen in late 2002 with the expected acceleration in recovery of global demand," the ADB said. "In the absence of unanticipated adverse shocks, growth in 2003 should be in the range of 3-3.5%," but further economic expansion over the medium term would depend on continued financial sector reform and corporate debt restructuring. Without significant advances in these two areas, it is unlikely that the recovery of investment needed to propel activity will materialise." The bank said that while the non-performing loan ratio of Thai banks had declined to 10%, compared with 18% a year earlier, the main reason was not the achievement of debt restructuring but the transfer of NPLs to asset management companies. The ADB said that the 2001 global economic slowdown had a significant impact in Thailand, where 60% of merchandise exports were information and communication technology products. Export receipts fell by 7%, and tourism also suffered after the September 11 events. Investment, the slowest component of demand to recover, remained sluggish as corruption, excess capacity and obstacles to corporate restructuring held it in check. The slowdown further arrested the country's battle against poverty, which stood at 15.9% of the population in 1999 compared with 11.4% before the Asian economic crisis. The percentage of poor Thais "may have risen further by the end of 2001", the bank said. The government had set a target of reducing poverty incidence to less than 10% of the population by 2006, but "achieving this target is likely to require much faster economic growth than currently anticipated and/or the application of pro-poor redistribution measures."