Thailand’s economy and subsequent exchange traded fund (ETF) may contract as a result of decreased demand for Asian goods.

The International Monetary Fund has predicted that Thailand’s economy will contract in 2009, writes Emily Kaiser for Forbes. Fiscal and monetary policies will be required to mitigate the contractions. GDP growth may drop in a range from 2% to 4%.

Thailand, Southeast Asia’s second-largest economy, is expected to shrink as a result of diminished exports, which account for 70% of GDP, as well as increases in unemployment, report Shanthy Nambiar and Susan Li for Bloomberg.

The Bank of Thailand cut interest rates by 2.25% to 1.5%. It is unlikely that borrowing costs will reach 0%. The monetary easing has not helped consumers receive loans from cautious, or stingy, banks.

The government has promised to spend another $44.5 billion over three years to help create jobs and jump-start growth. The spending will come from domestic borrowings and possibly $2 billion from international lenders. The public debt could rise to 46% of GDP in 2009.

• iShares MSCI Thailand Invest Mkt Index (THD): down 0.7% year-to-date

Max Chen contributed to this article.

Tags: Asia, Emerging Markets, Frontier Markets, Global ETFs, Thailand, THD