In a new economic analysis of the aftermath of the military coup in Thailand, the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) predicts that GDP growth in Thailand could reach 4.7 percent in 2007 if the new interim government maintains political stability and reduces uncertainty in government spending, especially in infrastructure investment.

"In our 'best-case scenario'," notes the Bangkok-based UNESCAP Executive Secretary Kim Hak-Su in the analysis outline released to Xinhua Friday, "we expect public spending to increase under the new interim government and play a key role in boosting GDP growth. "

"Thailand's macroeconomic fundamentals remain strong," he says. "We expect growth to be robust at 4.5 percent this year. Exports are strong and inflation is falling. The relatively flexible exchange rate regime and high foreign exchange reserves have contributed to these good outcomes."

As of today UNESCAP economists see no significant impact on the Thai economy from the Sept. 19 coup d'etat which toppled the Thaksin government. They note that the Thai stock market remains steady, Thai baht is stable, and contagion to other regional markets is limited.

Thailand's military ruling body Council for Democratic Reform ( CDR) has submitted the new prime minister designate and interim charter for royal endorsement. The new PM is to lead an interim government for about one year while a new constitution is being drafted to pave a way for a general election hopefully to be held in October, 2007, according to the timeframe given by the CDR after taking power in the Sept. 19 coup.

Although UNESCAP's macroeconomic forecast remains favorable, uncertainty remains for the Thai economy's short-term outlook.

Under a 'worse-case scenario' of political instability, UNESCAP predicts that in 2007 Thai economic growth could fall to 3.1 percent, with inflation increasing to almost 10 percent. The baht would depreciate by more than 20 percent, reaching almost 46 baht per U.S. dollar.

"The next few months will be closely watched by investors," says Kim Hak-Su. "The interim government will have a heavy responsibility to maintain economic stability and investor confidence in the economy."

"In the short-term the new administration will need to outline policies regarding the investment climate, especially macroeconomic policies and economic governance measures."

"It will be very important for the new interim government to provide timely clarification on government spending, particularly on the infrastructure investment component of the fiscal budget," he added.

Source: Xinhua