BANGKOK, May 24 (Bernama) -- The World Bank has forecast that the Thai economy will likely grow by 4.5 per cent this year, up from only 0.1 per cent expansion last year, thanks to the country's post-flood rehabilitation, Thai News Agency reported.

Dr. Kirida Bhaopichitr, Thailand-based senior economist of the World Bank, said on Wednesday that the World Bank's updated projection was indicated in its first report on Thailand in 2012, assessing that as much as some 1.5 trillion baht would be spent on the post-flood rehabilitation alone, which would boost the national economic expansion by 1.5 per cent this year, excluding other domestic consumption or spending.

The World Bank also predicted that Thai exports should expand by some 12 per cent this year, as the country's shipments to Europe in the first quarter of this year plunged by 16.3 per cent due to a considerable drop in demand in the huge European market, with Thai exports of computers and electrical appliances having faced the heaviest impact from the ongoing European crisis-- at least until the second half of this year.

Dr. Kirida acknowledged that the Thai economy is to cope with several risk factors this year, especially the persistent debt crisis of the euro zone, pointing out although less than 10 per cent of Thai exports are destined for Europe, the Thai economy is facing indirect impacts from parts of the country's reliance on other importing market which are Europe's direct trading partners, like China.

Moreover, the rehabilitation of flooded industrial estates has been delayed possibly until the end of the second quarter, which has affected Thailand's export-oriented production seen by a drop in the domestic industrial production by 15 per cent in January and 3.4 per cent in February 2012.

The World Bank suggested that the Thai government increase infrastructure development projects but cut its populist policies which are costly and will not significantly benefit the national economy, referring to the rice mortgage scheme which costs the administration as much as 300 billion baht, the reduction in corporate income tax which costs as much as 52 billion baht, the cut in the excise tax on oil which costs 9 billion baht monthly and the 2.8-billion-baht project to buy tablet computers for young students, cautioning that such the populist policies will cause a loss in national income worth some 1.5 per cent of the country's gross domestic product or GDP this year and will account for some 3 per cent of expenses in the GDP, and that the Thai government should be prepared financially to cope with a possible renewed world economic recession.

The World Bank, meanwhile, predicted that the economies of developing countries in East Asia and the Pacific will grow by 7.8 on average this year, down from 8.2 per cent last year, caused mainly by a slowdown of the immense Chinese economy, saying, however, that it believes the countries in the region can cope with impacts from the euro zone crisis. (RM1=10.05)

-- BERNAMA