The bank downgraded its previous forecast of a 4.5-per-cent economic growth due to the negative impact of Japan's earthquake and tsunami, and projected economic slowdowns in the United States and Europe, still the country's main export markets.

But the ADB was optimistic, with some reservations, about the populist policies initiated by the new government elected on July 3.

"We have some concerns about the fiscal sustainability of these initiatives, but if you look at the overall effort to boost consumption and spur growth, there is a logic to what they are doing, that we support," ADB Thailand director Craig Steffensen said.

Thailand's new government, led by the Pheu Thai party, has promised a host of policies designed to win votes from the poor, such as boosting minimum wage to 300 baht (10 dollars) a day, starting salaries for college graduates to 15,000 baht (500 dollars a month), and offering fixed prices for farm crops such as rice.

Pheu Thai's de facto leader is fugitive former prime minister Thaksin Shinawatra, whose now defunct Thai Rak Thai party won the 2001 and 2005 polls on a similar populist platform.

Many of those previous policies introduced by Thaksin, such as village development funds, debt write-offs for farmers and a free health scheme, were greeted with scepticism by economists.

"But some of the things we found controversial, turned out well," said Steffensen, who joined ADB's Thailand office in 2001. "It's hard for those of us not used to these policies to judge them," he added.

Thailand is deemed a upper-middle income country, with a gross domestic product of close to 300 billion dollars.

The current government is hoping to push Thailand into higher-income status, but the ADB cautioned that to do so a lot more investments were need in education and human resources.

Steffensen noted that Thailand was "perfectly positioned" to expand in the electronics, petrochemical and automotive industries, which are already well-developed, but it lacks the manpower.

"Thailand doesn't have the engineers, statisticians, mathematicians, accountants and construction managers who are needed to take over these industries," he said.

"For Thailand to exploit these opportunities its going to require a lot more be done to modernize and reform the education system," the bank's country director said.

Copyright dpa (Deutsche Presse-Agentur Gmbh), 2011