Although the governor of the Bank of Thailand Prasarn Trairatvorakul anticipated recovery in the country's badly flood-hit economy by early next year, he pointed out that long-term strategy of water management could pose a vital challenge to the government.

A total of 595 people were confirmed dead and two people were still missing in the floods that have inundated many provinces for more than three months, Thai Disaster Prevention and Mitigation Department reported on Friday. [File photo]

The governor elaborated that the impact of floods on domestic economy would be seen only in the fourth quarter this year as the floods have not damaged Thailand's long-run capability.

Agricultural sector is expected to be the first to restore since cultivation could start soon after waters recede, the government has already implemented some stimulus measures, and prices of agricultural products in the global market are rising.

It could, on the other hand, take longer for industrial sector to revive but some of affected manufacturers would be able to recover by the end of this year while most of them could return to normalcy in the second quarter of next year, according to the governor.

Measures imposed by the government after flood-crisis would play important role in enhancing private investment and rebuilding confidence among the investors, he said.

"The most important challenge awaiting for Thai economy is the ability of the government's ability of handling the long-term plan for water management which is considered as an influential factor for the confidence creating for both Thai and foreign investors," said Prasarn.

The view was also echoed by Phayungsak Chartsuthiphon, chairman of the Federation of Thai Industries (FTI), who said "Flood prevention and solution should be raised as the national agenda and concrete measures are needed. Private sectors would be very keen to follow up the progress."

"Confidence of the private sector depends largely on the government's long-term solution," Phayungsak commented.

Earlier November the government set up two committees -- Strategic Committee for Reconstruction and Future Development ( SCRF) and Strategic Committee for Water Resources Management ( SCWRM) -- for the long-term rebuilding stage.

The effort came after the three-month deluge has ravaged most parts of the country and swamped tens of thousands of businesses. Over 600 people have been killed while more than one million employees on the verge of losing their jobs.

The FTI's chairman said the inundation of seven industrial estates and parks might cost damage to the country's overall economy at around 400 billion baht (12.8 billion US dollars). About 70 percent of flood-stricken plants belong to Japanese nation, Phayungsak said.

However, given continually dull condition of world economy, the government should make a prudent move on budget allocation for the future water management, the governor of central bank warned. Prasarn further suggested that the government should deliberate cautiously the fiscal policy and had better spare its budget for economic stimulus packages for boosting the nation economy next year when economic situation in Europe and the United States is deemed to worsen.

The worst inundation in over 50 years has disrupted Thai economy as foreign investors could be reluctant to transfer production base to or increase investment in the country, said Chartsiri Sophonpanich, president of the Bangkok Bank. The floods have so far slashed growth projection of auto industry by 15 percent and electronics by 22 percent, he added.

Great impact of flooding situation has forced the central bank to readjust its forecast of this year's growth domestic products ( GDP). Economic growth of the year 2011 is expected to expand by only 1.5 percent following widespread flooding situation. In October, the bank cut the country's GDP forecast from 4.1 percent to 2.6 percent given ongoing floods.

It is very crucial for the government to send out the right signals to regain confidence from foreign investors by making a vigorous commitment that the severe disaster of this scale will never reoccur in the future.

"Confidence is the most important factor," the deputy secretary- general for the Board of Trade of the Thai Chamber of Commerce Pornsin Patcharintanakul pointed out. "The prime minister ( Yingluck Shinawatra) should be strongly committed (to flood prevention) and convincing investors that Thailand will not face with severe flooding again because this is what all entrepreneurs want to hear most." Pornsin said.