New data from the statistics agency in Thailand show a worse than anticipated fall in construction industry real growth by 12.8% for the fourth quarter of 2008. We have revised our data downwards. Real construction sector growth in 2008 was -4.7% and is forecast to remain in negative territory for 2009 at 4.3%. However, while obviously far from upbeat, our new forecast for 2009 as a whole is clearly more favourable than the severe plunge in real sector output experienced in Q408. Several factors should lend support. The authorities are boosting infrastructure investment. A programme worth THB1.9trn over a period of up to four years will concentrate squarely on infrastructure projects that can be put into action as quickly as possible. Risks to our forecasts are both to the upside and the downside for 2009 and 2010. The main upside risk (especially for 2010) includes a more rapid-than-expected recovery of the global economy, which would boost Thailand's economy at a time when additional state-driven infrastructure spending will be kicking in with full effect. Downside risks for construction activity include the Thai government being unable to deliver on promised spending programmes and a continuation of a severe recession in key export markets (particularly the US) throughout 2010. We re-evaluate the prospects for Siam Cement and Italian Thai Development Company in the wake of their 2008 results. Losses are beginning to bite - the former generated a loss in Q408, while the latter registered a net loss of THB2.7bn (US$75mn) for 2008 as a whole. We analyse each company's ability to cope with what will likely be an extended downturn, even in a context of higher government infrastructure investment. The pace of the proposed construction of a 5,000km rail route by the Association of South East Asian Nations (ASEAN) is slowing due to high infrastructure costs, according to Bernama news agency (February 2009). The cost of the project was originally anticipated to stand at around US$23bn, but associated infrastructure costs have since risen.
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