State agencies are lowering interest rates and increasing public spending to boost investor and consumer confidence, office senior economist Ekniti Nitithanprapas said.

The office revises its economic forecast next month. An earlier prediction put 2007 growth at between 4 per cent and 4.5 per cent, down from 5.1 per cent in 2006.

Investors worried that growth would dip below 4 per cent called for a deeper policy-rate cut of one percentage point.

The Bank of Thailand cut its policy rate by half of one percentage point on April 11. The rate is now 4 per cent.

The office predicts cuts will see rates between 3.75 per cent and 4 per cent this year.

Ekniti said export growth was better than estimated. It was about 18 per cent in February. The world economy has not slowed as much as the International Monetary Fund and other research houses projected, he said.

This is a positive for the economy this year. He believed Thailand would benefit from main Asean members Indonesia, Malaysia and Singapore attempting to boost domestic demand.

Asean finance ministers agreed in Chiang Mai earlier this month that the 10-nation bloc would boost domestic demand to compensate for an anticipated world economic slow-down.

Meanwhile, regional infrastructure investment this year is tipped at US$100 billion (Bt3.5 trillion).

Ekniti said downside risks such as low private investment and low consumer spending existed.

February import figures suggest a further slow-down in private investment. Imports grew 3 per cent only, and that indicates purchases of machinery and capital goods will contract further, he said. Detailed data are not yet available.

Consumption remains low. According to the latest information, Revenue Department value-added-tax targets for March were missed by 7.6 per cent.

Consumers are worried about incomes, and this means reduced spending on durable goods.

Excise collected in March from automobile-manufacturers missed its target by 8.9 per cent. That from motorcycle-makers was 12.4 per cent short.

Excise is levied on wholesale receipts when goods are delivered from factories.

Ekniti is waiting for the completion of an economic-stimulus package on April 18 that will then be sent for Cabinet approval. The package is being written by his office and advisers of Finance Minister Chalongphob Sussangkarn.

Lower growth is partly caused by delays in state spending as a result of the political crisis.

The government is attempting to boost state spending and hopes this and lower interest rates will help economic growth rebound in the second half of the year, Ekniti said.

"However, this depends on actual spending and whether we can meet our targets and if the political situation is stable or not," he added.

The government hopes to speed spending to 93 per cent of a total Bt1.57 trillion. The 2007 budget anticipates a Bt140-billion deficit, equivalent to 1.7 per cent of gross domestic product.

Some economists worry about the impact of a stronger baht on export growth. This could show up in March export statistics.

Wichit Chaitrong

The Nation