IMF foresees 3% GDP dip

       Thailand's economic contraction this year will be limited to 3% as the government increases spending to counter falling exports, the International Monetary Fund said yesterday.
       The government's budget deficit is expected to widen to 4.5% of gross domestic product in the current fiscal year ending Sept 30 from 0.5% in the previous year, the Washington-based lender said in a statement. The economy may expand 1% in 2010.
       With domestic demand weak and external demand faltering, public spending is the key to limiting growth cuts, the IMF said."An early start on the three-year public investment programme is recommended. This would support demand beyond 2009."
       Thailand's recession eased last quarter, helped by public spending and improving export orders. The government plans to spend 1.06 trillion baht through 2012 to buoy growth and consumption, in addition to a 116.7-billionbaht stimulus package implemented in the first half of 2009.
       The Bank of Thailand on Wednesday kept its benchmark interest rate unchanged at a third straight meeting after lowering borrowing costs by a total of 2.5 percentage points in four meetings from December to April.
       The central bank has scope for further cuts in the policy rate, the fund said. The impact of monetary policy may be limited because of a weak economy and excess liquidity in the financial system, the IMF said.
       The economy, which contracted 4.9% in the second quarter from a year earlier, may shrink as much as 3.5% in 2009, the National Economic and Social Development Board said on Monday.Thailand is experiencing a V-shaped recovery, Chakramon Phasukvanich,a member of the central bank's Monetary Policy Committee, said yesterday.
       The baht is broadly trading at the appropriate level, the IMF added. The Bank of Thailand is committed to a flexible exchange rate and will intervene only to smooth excessive volatility in the currency, the fund added.
       "The Bank of Thailand's continued commitment to a flexible exchangerate system is welcome," the IMF said.
       The baht has traded in a range of 33.88 to 34.41 per dollar since the start of June as the central bank intervened to stall gains and relaxed rules on overseas investments. It was little changed at 34.02 yesterday.