Skyrocketing global oil prices in the wake of the recent attacks by Israel in Lebanon will not further increase inflation, according to MR Pridiyathorn Devakula, governor of the Bank of Thailand (BOT).

He said yesterday that oil prices had been on the rise for a few days and the BOT was monitoring them.

"No one wants a hike in oil prices but it's at the mercy of international politics. So we can only prepare for the events ahead," he said. He would not say how the BOT had prepared for the price spike. Attchana Waiquamdee, the BOT's assistant governor, said the oil price was higher than expected but the central bank believed that it would not affect inflation. The BOT forecasted in April that the oil price in the Dubai market would average US$63 (Bt2,409) a barrel in the third and fourth quarter of this year. But it is currently priced at $70 a barrel.

Caretaker Finance Minister Thanong Bidaya said that the increase in oil prices fuelled by Israel's attacks was unlikely to influence the central bank's stance on its monetary policy. Inflation was 5.9 per cent in June from June 2005, compared to 6.2 per cent recorded in the previous month. But, he said the authorities should closely monitor prices and analyse the impact of high oil prices on the economy.

A BOT Monetary Policy Committee is scheduled to meet tomorrow. Before the situation worsened in the Middle East, most analysts and economists had expected the BOT to keep its policy rate intact. The 14-day repurchase rate is currently 5 per cent. The minister insisted that the economy would grow about 4 per cent this year.

Growth of 6 per cent in the first quarter has helped keep the economy on track, but gross-domestic-product growth likely slowed in the second quarter, the numbers for which have yet to be tallied.

"We have high immunity compared to other countries. It is still possible that the economy will grow 4 per cent this year because the economy is stable," said Thanong.

But he expressed concern over the slowdown in private investment among domestic and foreign firms, saying his ministry would study the reason for sluggish investments and find ways to boost it.

He said the political problems plaguing the country would last until the end of the year. Thanong said the Kingdom posted a net capital inflow in June, following a net capital outflow in the month prior.

And the baht is at a satisfactory level, around Bt38 per dollar, he said, adding that the BOT was keeping an eye on foreign exchange movement.

Anoma Srisukkasem

The Nation