Net revenues of Bt1.34 trillion fell short of target, while gross revenues were higher than target by Bt2.1 billion.

Collections by the Excise and Customs departments were lower than expected due mainly to higher oil prices, the excise tax cut for diesel and stronger-than-expected appreciation of the baht.

While the Revenue Department's receipts were 12.3 per cent above target, the Excise Department's intake was 12.3 per cent lower due to reduced consumption of fuel and tobacco.

The Customs Department missed its target by 20.1 per cent, due to the restructuring of import tariffs to boost the country's competitiveness as well as to comply with free-trade agreements.

The shortfall at the Excise Department was Bt38 billion, and Bt25 billion at the Customs Department.

The Revenue Department pulled in Bt48.2 billion over target, while other state agencies collected taxes higher than target by Bt16 billion.

Somchai Sajjapongse, deputy director-general of the Fiscal Policy Office, said the government's net revenues in the fiscal year ending on September 30 were lower than target by 1.5 per cent.

The poor performance of the Excise Department was attributed to higher oil prices that stifled demand and the excise tax break for diesel imposed early in the fiscal year, while the Customs Department suffered from a stronger-than-expected baht, which reduced import duty revenues converted into the local currency.

"The tax refunds of the Revenue Department were higher than target by Bt29.57 billion. Although this has helped the

private sector's liquidity position during the economic slowdown, overall government revenues have declined significantly from target," Somchai said.

Citigroup said in a report that the government's annual project budget may run to about Bt20 billion per year over three years given that the Bt60 billion price tag for the "blue line" mass transit project.

The bank also predicts a quarter-percentage-point policy rate cut by the end of this year as the interim government underscores a prudent fiscal bias amid significantly lower inflation risk. Domestic demand will also weaken towards the end of this year, it said.

Bandid Nijathaworn, a deputy governor of the Bank of Thailand, has said the central bank sees little need to raise its policy interest rate further due to the easing in inflationary pressures.

The surplus liquidity in the banking system would also help stabilise interest rates, creating a favourable environment for a revival in domestic demand. Accelerated government spending would inject liquidity into the economy next year, fuelling consumption.

The economy is likely to bottom out this quarter and pick up steam next year, he told the "Thai economic outlook in 2007" seminar yesterday. The economy will benefit from both higher exports and domestic demand next year, while economic growth this year was supported by only exports. But export performance remains the key economic engine ahead of consumption and investment.

"There is a good possibility that economic growth next year will be higher than this year," he said.

The recovery in domestic demand next year depends on decreasing importance of the four key economic risks that played out this year - oil prices, inflation, interest rates and government spending. But risk factors still exist, including oil prices, a global economic slowdown and foreign-exchange volatility, he said.

Global oil prices have dropped rapidly from US$72.3 (Bt2,713) per barrel in July to $56.5 currently in the Dubai market, leading to declines in domestic retail prices for fuel. Inflation has cooled down from 6.2 per cent in May to 2.7 per cent last month and is expected to soften for the rest of the year, he added.

Anoma Srisukkasem

The Nation