'Fragile' Thai growth pegged at 2%

The country where the Asian financial crisis started still has weaknesses that need addressing, the IMF said

By CNN's Alex Frew McMillan in Hong Kong

BANGKOK, Thailand -- Thailand's economy will grow at 2.0 percent this year, less than half last year's rate, according to the International Monetary Fund.

It risks not even hitting that. Thailand remains "fragile," and there's downside risk, the IMF said in its annual take on Thailand's economy, released overnight in the United States.

The country, where the Asian financial crisis started in 1997, has made "significant progress" at stabilizing its economy and fostering recovery, the group said.

But corporate-debt restructuring is moving too slowly in Thailand, and the quality of reforms is questionable, the IMF stated.

Weaknesses need addressing

It noted that "a number of economic weaknesses must still be addressed for the recovery to remain on track."

The Thai Asset Management Corp., which was set up in June, will go some way to addressing that.

The government-backed company is slated to buy $30 billion worth of problem bank assets, starting in September. That's about half the country's total problem loans.

Most of the bank assets it will take over are government debt, though. The private sector still needs to clear up its debt burden, the IMF stated.

The Thai government has committed to balance its budget over the next five years and cut government debt to 60 percent of the country's output. Both moves got approval from the IMF.

Thailand's economy grew at more than 4 percent for the last two years. It crashed 11 percent in 1998, in the fallout from the Asian crisis, which started with a collapse in the Thai baht.