BANGKOK – The Thai economy is expected to face greater challenges next year amid the ongoing global economic slowdown, according to the Bank of Thailand (BoT).

Speaking at a seminar on "The Direction of Thai Economy in 2009 amid the Global Economic Plunge and Political Risks," BoT Deputy Governor Bandid Nijathaworn said that world economic growth is projected to decline to 1.9 per cent next year from 2.5 per cent this year since the US economy is likely to remain flat with the economies of Europe and Japan forecast to expand only by 0.5 per cent.

The economic slowdown of the global economy and Thailand's trading partners will have a three-pronged impact on Thailand, he said. Centrally, Thailand's exports are likely to grow at a slower pace. Exporters must adjust to changed market conditions to maintain their competitiveness.

The government must boost local spending to offset the anticipated shortfall in revenue earned from exports. Many countries in Asia are turning to count more on local consumption and spending as Thailand had done.

Also, revenues earned from tourism in the service sector will be reduced.

Finally, the inflow and outflow of foreign direct investment would be affected, which could lead to a liquidity crunch.

Bandid said Thailand's economic fundamentals at present are stronger.

Commercial banks have enjoyed a continued profit growth for seven years and non-performing loans remained at 6.4 per cent as of the end of June, and the capital-to-risk asset ratio at 15.2 per cent.

In addition, Thailand's international reserves are now higher than in the past, he said. TNA