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ASEAN
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2003-12-21 18:39:31-05
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Thailand achieves top Growth Rate in ASEAN
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Thailand?s growth comes in second only to China, ?bubble? fears still abound
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'Better late than never,' is perhaps the operative word for the Thai economy's performance this past year. Although the economic policies of the Thaksin Shinawatra government can be credited for providing stimuli, many economic observers, especially Moody's, were reluctant to boost Thailand's ratings. Nevertheless, the Thai economy continued to perk along and when Moody's did revise its ratings, the country received two upgrades from the ratings agency. Ratings agencies can't seem to forget that the 1997-98 financial crisis started in Thailand when currency speculators sold the baht when it was thought it was too high. The baht then had been pegged at 25 baht to the dollar for a number of years. The inept Thai government at the time, tried to stem the Thai baht's fall and in the process wasted billions of baht in a fruitless effort. Currently, the Thai baht floats and is in the 39-40 range for the US dollar, although it is expected to strengthen in the coming year with a long-term goal of 35 baht to the dollar in sight. Domestic demand is soaring thanks to the government's lowering of requirements for obtaining credit cards. Private investment is picking up although restrictions on the percentage of involvement that foreigners can have in certain industries such as agriculture remain a problem. It's widely conceded that to sustain recovery, more private investment will be necessary and to that end the Thai government will need to remove more restrictions for private investors. Bank credit growth to the private sector has turned positive, the current account is in surplus and low inflation has persisted. Economic growth this year is expected to hit 6.4 percent thanks to a surging stock market (SET), a resurgent real estate sector, a stronger baht and booming exports. Current Thai government forecasts aim for 8 percent growth next year. What are the fears? These are mainly over the potential bubbles lying dormant in the real estate market and the stock market. In spite of its success, the government has been slow to tackle much needed reform in the banking sector as well as strengthening laws in the bankruptcy sector. The year 2004 will be of great interest for Thailand observers as it is the last full year before upcoming elections. Thaksin's Thai Rak Thai party dominates the political scene but many worry about the government's failure to pursue democratic reforms put forth in the 1997 Constitution.
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