Speaking yesterday at a seminar entitled "The Bank of Thailand's view on the Thai economy in the second half", Bandid Nijathaworn, deputy governor of the central bank, said the recent easing in growth momentum was caused by oil prices and other uncertainties, while government investment had been minimal.

"After adjustments, it will recover in the fourth quarter of this year. Then crucial momentum will strengthen growth momentum to move forward to next year," Bandid said.

Inflation pressure still exists, thus a policy to keep inflation at a suitable level is still needed. If inflation pressure rises again, it would reduce the purchasing power of the private sector and reduce the chance of a private spending recovery, he explained. He forecast that inflation pressure would decline in the second half of this year due to the effect of last year's high base, a series of rate hikes so far, and lower price competition among businesses.

In addition, there is a risk of capital flows from stock and bond markets as there is high uncertainty over the interest-rate policy of key economies including the United States, Japan and the Euro zone. Investors who have invested in Asia are reviewing their policies and wondering whether it is worth investing, as interest rates are higher elsewhere.

There will be occasional uncertainties so investors should expect some further volatility, although the central bank believes current volatility is under control, Bandid said.

He said the current domestic uncertainty, particularly political issues, would take some time before being settled, but he did not elaborate.

Rapee Sucharitakul, chairman of Kasikorn Securities, said at the same seminar that he agreed the economy is likely to turn around in the fourth quarter if inflation pressure declines and oil prices are not too volatile.

He believes the stock market is likely to recover in the third quarter, prior to the general economic recovery, when it is less volatile.

Bandid said there were five factors that would boost the economy in the fourth quarter. Agricultural incomes as well as employment will improve and this will support consumption, tourism and exports.

"Private consumption will improve, while new investment will rise due to lower inflation pressure.

"Private investment will expand to be supported by liquidity.

"The fiscal policy will also help boost economic momentum in the second half.

"Finally, a more certain picture of politics will boost the private sector's confidence," Bandid said.

Anoma Srisukkasem

The Nation