US investment bank Morgan Stanley has lowered Thailand's economic growth forecast this year to 5.7 percent from 6.0 percent due to the impact of the tsunami disaster on the country's tourism industry.

While the affected Thai provinces account for only 2.7 percent of the country's gross domestic product (GDP), the damage to the tourism sector could have a "multiplier effect" on the entire economy, Morgan Stanley said in a report received here late yesterday.

Nearly one-third of foreign tourists arriving into Thailand visit resorts in the affected provinces, it noted.

"We think Thailand risks achieving only 75-80 percent of the official 13.4 million tourist arrivals forecast for 2005," said the report by Morgan Stanley's chief Southeast Asia economist Daniel Lian.

The bulk of the impact is expected be felt in the first quarter this year.

The report said, however, that the strength of the rest the Thai economy and an expected pick-up in domestic investement should mitigate the effect of any sharp decline in tourist arrivals.

"We have thus downgraded our Thai GDP growth estimate for 2005 by a moderate 0.3 (percentage points) from 6.0 percent to 5.7 percent," it said.

"While there are further downside risks to our revised 2005 forecast if tourist arrivals, receipts and the multiplier effect (are less) than anticipated in the coming months, we believe the Thai authorities can leverage its fiscal and domestic investment strength if necessary."

Impact on Indonesia 'minimal'

Morgan Stanley maintained its 4.5 percent GDP growth forecast for Indonesia as the tsunami damage has been largely confined to the province of Aceh, nearest to the epicentre of the Dec 26 earthquake that triggered the massive waves.

"Given that the energy (mainly oil and natural gas) production facilities in Aceh or Northern Sumatra have survived the tsunami, the overall damage to Indonesia's economy appears to be minimal," it said.

It also noted that the impact on Malaysia is minimal and maintained its growth forecast for the country at 4.8 percent.

Compared with the damage to South Asia, the devastation in Southeast Asia "is largely confined to rural areas rather than key economic and densely populated urban centres and industrial hubs," the report said.