Investor confidence remained low last month, reflected in a drop in the Private Investment Index of 0.1 per cent from July amid rising production costs, according to the Bank of Thailand.

The index reached 90.9 last month, up 0.6 per cent over the same period last year and compared with July's growth of 1 per cent on the year, BOT senior director Suchada Kirakul said yesterday.

Private investment has been slowing since early this year, with investors waiting for clearer policies from the government and hesitating to invest further due to higher operating costs, driven mainly by oil prices.

Suchada said one of the reasons for last month's low investment was a high base effect as a result of Shin Satellite importing the Thaicom satellite, which was counted as a private investment. Excluding the satellite, the Private Investment Index grew 2 per cent on the year.

The BOT expects private investment this year to grow 4.5-5.5 per cent, while next year it is expected to grow 7-8 per cent.

"Our talks with some investors with existing investment plans indicate they will invest further. But projects related to the government's policies will be postponed," she said.

BOT Governor MR Pridiyathorn Devakula said yesterday that the government's mega-infrastructure projects that greatly benefited the public should be implemented. He said gross domestic product growth this year was likely to be 4.5-4.6 per cent, while next year's economic growth would be reviewed depending on investment in mega-projects.

Suchada added that the Private Confidence Index rose 1.3 per cent on the year in August, compared with 2.6 per cent in July.

This reflects the generally cautious attitude among consumers about spending, due to higher oil prices. But consumption is expected to recover next year.

In August, a US$271-million (Bt10.18 billion) trade surplus was recorded, marking the first surplus in five months, as exports showed robust growth of 17 per cent, while imports grew only 11.2 per cent. The current account was in the black $812-million surplus.

Meanwhile, Glenn Maguire, Societe Generale Bank's chief economist for the Asia-Pacific region, said Thailand's military coup last week would not affect the country's economic growth very much, thanks to the Kingdom's strong economic fundamentals.

"We still see good prospects for the Thai economic outlook for next year. Besides the country's strong economic fundamentals, it's also supported by a stronger Asian economy," he said.

However, he said Thailand's political situation should get back to normal quickly. Particularly, the country should return to a democratic system and hold a new general election, because that was the key factor in building up foreign investors' confidence.

He said foreign investors generally still had enough confidence to invest in Thailand.

Maguire said the interim prime minister should be someone acceptable to the public, in order to boost confidence on the part of both local and offshore investors.

He forecast global economic growth of 4.9 per cent this year, supported mainly by the two Asian giants, Japan and China. The growth rate for the world economy for next year is expected to decrease slightly to 4.1 per cent.

Anoma Srisukkasem,

Somruedi Banchongduang

The Nation