Thai finance minister Korn Chatikavanij this weekend denied there would be any regional spillover from the countrys crisis, despite growing fears that it could dent investor confidence in southeast Asia.
Its a long, long way from the situation where we become problematic to the region, Korn told Emerging Markets in a telephone interview from Bangkok.
Everything in fact looks very good and solid, [although] prospects dont look so bright given that there is this political tension which remains.
But he added: Our currency has remained strong, our government revenues have been increasing, and we are actually repaying some of the government debt earlier than was originally planned.
His comments come as Asean nations watch Thailands unfolding drama with increasing unease. An Indonesia foreign ministry spokesman was quoted last week as saying he feared instability in Thailand could lead to a repeat of the 1997 Asia economic crisis, where a collapse of the Thai baht sparked a regional economic slump.
Asean politicians in recent weeks have stepped up their calls for a resolution to the political standoff in Thailand, in which anti-government protestors have brought the country to a standstill.
Korn said the Thai economy had been recovering well from the global crisis until tensions escalated in Bangkok. All engines were fine, Korn said. But what happened subsequent to that was an escalation of the political standoff and thats already having an impact on confidence.
Korn said that prolonged protests could cut growth to 2%, from previous projections of roughly 4.5%. If problems persist for a full year, its 2% less growth, he said.
But Korn said early indications show that the countrys quarterly GDP figures are expect to hit 9% growth year on year. These figures will be formally announced in the next few days.
This will probably be one of the highest quarterly growth rates in the world, Korn added. This reflected a strong recovery in exports and farm income, as well as the government stimulus packages.
But Korn warned that the tourism sector was particularly hard hit, with very sharp drop offs in bookings till June.
During the recent standoff red-shirt protestors occupied parts of central Bangkok that were mainly made up of luxury hotels and shopping malls.
Unless we can find quick and relatively peaceful resolution to the crisis, it may have quite a significant impact on the high season towards the end of the year, Korn said. Tourism has a share of total GDP of around 6.5% and probably more if you include indirect impact. So that alone will be a significant dampener on prospects for the year.
He added that foreign investment had also been affected. So far theres no tangible impact as yet but without a doubt investors who have previously considered Thailand to be relatively free of political risk will have already reassessed that assumption.
This would make [it] that little bit harder for us to attract the kind of investments that we want, he said.