Thailand's economy shrinks 9% after flood disruptions

image captionHonda and other manufacturers saw their products damaged by the floods, hurting exports

Thailand's economy contracted sharply in the last three months of 2011 after some of the worst flooding on record disrupted manufacturing.

Gross domestic product declined by 9% in the three months to December compared to a year earlier, the National Economic and Social Development Board (NESDB) said.

Compared to the previous three months, the economy contracted by 10.7%.

The floods killed more than 700 people and affected two-thirds of the country.

Brighter outlook?

Analysts said despite the poor numbers, the future outlook was not as bleak.

"The fourth-quarter figures reflected a worse-than-expected impact from the floods. The overall picture going forward will pick up," said Pimonwan Mahujchariyawong from Kasikorn Research Centre.

The NESDB raised its forecast for 2012, saying it expects a rise in both public and private spending.

Thailand's Prime Minister Yingluck Shinawatra has said the country will spend 350 billion baht ($11bn; £7bn) on infrastructure after the floods.

The NESDB said it expects the economy to expand by between 5.5 and 6.5% this year, rather than the 4.5 to 5.5% it had forecast in November.

The Bank of Thailand cut its benchmark interest rate for the second time in January.

Export push

Major companies that manufacture in Thailand saw exports hit when industrial estates flooded, including Honda, Sony and Western Digital.

The manufacturing index fell for the fourth month in a row and exports fell for a second month in December.

Honda, Toshiba and Fujitsu have all cut their profit forecasts because of disruption to production lines.

Thailand's Ministry of Commerce said it was targeting a 15% increase in exports this year, compared to 17.2% rise in 2011.

However, analysts said slackening global demand would also weigh on exports.

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