BANGKOK, Dec 20 (Reuters) - Thailand's worst floods in at least 50 years devastated industry and farmland in the second half of this year but the situation is improving steadily in many areas and some factories are getting back to work.
The government, central bank and economists have slashed their economic growth forecasts for the year, but they have predicted a rebound next year due to post-flood spending.
Prime Minister Yingluck Shinawatra said on Dec. 8 that flood-related damages had been put at 1.3 trillion baht (${esc.dollar}42.2 billion). Over the longer term, rebuilding and the improvement of flood defences will require huge sums.
Below is a summary of the impact on Southeast Asia's second-largest economy and how the government is responding.
IMPACT ON GDP AND INFLATION
On Nov. 30. the Bank of Thailand cut its 2011 growth foreast to 1.8 percent from 2.6 percent, itself a decrease from the 4.1 percent projected before the floods. But it raised its 2012 forecast to 4.8 percent from 4.1 percent, anticipating spending and pent-up demand.
The state planning agency slashed its 2011 growth forecast to 1.5 percent from 3.5-4.0 percent on Nov. 21. and projected a 3.7 percent contraction in the fourth quarter from a year earlier. But it predicts growth of 4.5-5.5 percent in 2012. .
Deputy Prime Minister Kittirat Na Ranong said on Dec. 9 that economic growth could even reach 7 percent in 2012 while Finance Minister Thirachai Phuvanatnaranubala has predicted growth of at least 5 percent.
Inflation stayed high at 4.19 percent in November, unchanged from October, but food prices jumped 10.2 percent from a year earlier and flood-related supply problems may continue to cause price distortions in coming months..
GOVERNMENT RECOVERY EFFORT
The cabinet approved 20.1 billion baht in emergency spending for post-flood rebuilding on Dec. 12. It is part of a previously pledged 130 billion baht, including 10 billion in local government funds, to help the recovery effort..
Ministers have talked about 600-700 billion baht for short- and long-term flood management plans, but little has been said as yet about the sources of funding.
Virabongsa Ramagura, head of a flood committee set up by the government, suggested some could come from the country's ${esc.dollar}177.5 billion in foreign reserves but central bank Governor Prasarn Trairatvorakul insists these must be held in secure investments.
The cabinet has agreed to a bigger budget deficit of 400 billion baht in the current fiscal year from Oct. 1, up from 350 billion. Public debt is expected to rise to an estimated 43.5 percent of GDP this fiscal year from 40.22 percent as of August.
The government has helped industry with tariff-free imports of machinery, cars and parts, and raw materials to be used in export goods, to replace items damaged by the floods.
INTEREST RATES
The Bank of Thailand cut its benchmark interest rate by 25 basis points to 3.25 percent last week, after more than a year of tightening, to counter the impact of flooding and said it could cut again if the recovery is slow..
Some economists expect the central bank to cut the policy rate again at its next meeting on Jan. 25.
Central bank Governor Prasarn said on Dec. 16 that rates were not on a downward trend as inflation was high and the economy could return to normal in the middle of 2012, meaning recent policy easing may be temporary..
IMPACT ON FACTORIES, OUTPUT, EXPORTS
The flooding shut down seven big industrial estates in October. But about 14 percent of the affected factories there are back at work, the Industry Ministry said on Dec. 19, expecting all firms to be back at full capacity by the second quarter of 2012.
The electronics and car sectors have suffered in particular. Thailand is a regional hub for the world's top car producers, and even if most of the big assembly plants are away from the floods, car part firms have been affected to varying degrees.
Toyota Motor said on Dec. 9 its Thai production was expected to return to normal this month.
Honda Automobile said on Nov. 29 it expected the flooding to cut its 2011 sales in Thailand by 30 percent. Japanese business daily Nikkei reported that Honda planned to resume its flood-hit plant only from April..
Thailand is the world's second-biggest maker of hard disk drives. World prices are rising because of the disruption in Thailand, and tech firms may need months to recover.
Chip maker ON Semiconductor said on Dec. 9 it would cease production at its Sanyo Semiconductor division on Rajana industrial estate because it would cost too much to restore the facility..
Customs data showed export values dropped 12.4 percent in November from a year before..
Factory output, which tracks exports, plunged 35.8 percent in October from a year before and is likely to fall further in coming months..
RICE, BANKS, TOURISTS
Thailand is the world's top rice exporter and the government has estimated that it could lose a quarter of its main crop due to the floods. It says paddy output could fall to 19 million tonnes from the expected 25 million, although the second crop may be bigger than normal..
The number of bank branches closed by the floods has fallen to only 57 from as high as 631 at one stage. TMB bank said on Dec. 19 that it expected loan growth of more than 10 percent this year and more than 15 percent next year. .
The floods may cut foreign tourist arrivals by 1 million to 18.5 million this year, meaning a loss of 50 billion baht, the Tourism Council of Thailand said on Nov. 18..
Don Muang airport, used by budget airlines for domestic flights and by private planes, has been closed since Oct. 25 and Thai media has said it may not reopen until next April. The main international airport, Suvarnabhumi, did not close.
(${esc.dollar}1=31.3 baht) (Compiled by Orathai Sriring; Editing by Alan Raybould)
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