Thai prime minister defends flood response, Bangkok on alert

Thai Prime Minister Yingluck Shinawatra defended her government's response to the country's worst floods in half a century on Wednesday as troops battled to protect industrial centres and Bangkok braced for rising waters.

Yingluck said public morale needed to be lifted and politicians, businesses and the public needed to unite to speed up recovery and minimise losses. The capital has seen only minor flooding on its outskirts but seven of its northern districts were put on alert on Wednesday, with 200 families evacuated and others told to move cars and valuables to higher ground.

In response to the flood crisis, the central bank left its policy rate unchanged at 3.50% percent on Wednesday, taking a pause from more than a year of tightening because of mounting economic losses and perceived inflationary pressures as goods become scarce due to a severing of supply lines. Inflationary pressure might also come from aggressive government spending on a flood-recovery effort plus a new water-management system in its hardest-hit provinces, the Bank of Thailand said.

After just two months in office, Yingluck has faced criticism over her government's conflicting messages and slow response to the floods. Provisional damage estimates vary, but could reach as much as $5 billion, according to the government. The cost to the economy could go far higher if Bangkok, which accounts for 41% of gross domestic product (GDP), is swamped.

PM UNDER PRESSURE

Yingluck said communications would be improved with the public and all efforts were being made to protect the sprawling capital. "I tell you the truth, we have done everything to the best of our ability," she told reporters, her voice shaking.                                            "However, this year we are facing the most severe flooding ever. We need encouragement, support and cooperation from all sectors and from all the people as well."

The floods in the north, northeast and centre of the country have killed at least 317 people since July, swamping industrial estates and farmland in the world's top rice exporter. A total of 27 of the Thailand's 76 provinces have been affected, covering some 4 million acres (1.6 million hectares) -- an area roughly 16 times the size of Hong Kong.

In Cambodia, 247 deaths have been reported, including at least 80 children, while authorities in Vietnam say the death toll there has risen to 55. According to the United Nations, a total of 745 people have been killed and 8 million affected by flooding in Thailand, Cambodia, Vietnam, Laos and the Philippines since July. The biggest highway and gateway to Bangkok from northern Thailand was closed because of knee-deep water that poured in when canal gates were opened to relieve pressure on dikes. Plans were being carried out to divert water as deep as 3.8 metres (12 feet) away from industrial centres in Ayutthaya and Pathum Thani provinces as aid teams handed out food and medicine and boats weighed down with food and clothing ferried people to higher ground. A big concern is another period of high tides and heavy rainfall forecast for the end of October.

Late on Tuesday, Finance Minister Thirachai Phuvanatnaranubala told Reuters the economy would probably grow by little more than 2% this year -- from 3.7% seen a week ago -- because of the floods, which have forced a series of industrial estates to close this month. The economy, Southeast Asia's second-largest, will probably shrink 1.1% in the fourth quarter from a year earlier, Thirachai said, the clearest indication yet of the disaster's economic toll.

The government is certain to step up spending to deal with the flood damage. The cabinet has approved an increase in the budget deficit to 400 billion baht ($13 billion) for the fiscal year from October 1 from 350 billion.

BANGKOK BRACED

Deputy Prime Minister Kittirat Na Ranong said the government would look at ways to borrow "several hundreds of billions of baht" to fund rebuilding and Finance Minister Thirachai said it could turn to a multilateral institution to tap into its technical expertise as well as its funding. Even though Bangkok is likely to escape the sort of flooding that has overwhelmed other areas, including the ancient capital of Ayutthaya and its centuries-old temples, officials warned on Wednesday that the danger remained.

Bangkok Governor Sukhumbhand Paribatra urged residents not to panic, as water threatened seven northern districts after canal gates were opened to channel water to the sea. At least six big industrial estates have been shut down, most in Ayutthaya, where residents forced from their homes have pitched tents close to roads and parked their cars on higher ground. The Nava Nakorn estate north of Bangkok, Thailand's oldest with 270 plants and about 270,000 workers, was completely flooded, according to the government's Flood Relief Operations Centre, while the smaller Bang Kadi estate to its south was reported to be in danger, with the operator telling firms to move machinery.