The revision also assumes that private and public investment is not expected to recover until next year after the general election. Investment recovery will thus be delayed from the second half of this year to next year.

The Finance Ministry has also scrapped plans for a road show in Japan, while the Stock Exchange of Thailand has decided to proceed with the road show but only with listed companies.

SET president Patareeya Benchakulchai said the SET is considering when to conduct the road show which has been postponed from early March. She said that despite the BOT's downgrading the GDP growth forecast, stock investment sentiment would not be affected as this development has already been absorbed by investors.

"I've talked to foreign investors and most still think the Thai stock market is interesting due to the low price/earnings ratio," she said.

A source in the Finance Ministry said the ministry cancelled its road-show plan as it had too short a time to prepare information after the recent change of finance minister, from MR Pridiyathorn Devakula to Chalongphob Sussangkarn.

The BOT said at a press conference yesterday that the dampened confidence of businessmen and consumers, along with unclear long-term government policy, have played a key role in the economy, resulting in a delay in investment recovery from the second half of this year to next year.

Economic growth next year is forecast to be 4.3-5.8 per cent, higher than the previous figure of 4.0-5.5 per cent. Headline and core inflation forecasts are unchanged at 1.5-2.5 per cent and 1-2 per cent this year and 1.0-2.5 per cent and 1.0-2.0 per cent next year, respectively.

Mathee Supapongse, a director of the Monetary Policy Group, said investors were likely to make decisions on new projects next year after they are assured of stability in the political situation and government policy. But continuing investment projects and expansion of capacity utilisation will continue this year.

The forecasts were made under the assumption that a general election will happen this year as announced by the interim government. This would improve domestic sentiment, bringing back domestic demand and confidence in the first quarter, a development that would be encouraged further by the lowering of interest rates and inflation, he said.

"When the political situation is clearer, Thai and foreign-investor confidence will pick up. We believe the recovery will happen speedily because investment potential exists as low interest rates can attract investment," Mathee said.

The central bank, however, has not projected any impact on the economy if the election does not happen this year, but said that consumption and investment levels can reflect political risk.

According to the BOT, total investment was forecast downward to 4-5 per cent this year, down from 6-7 per cent in its previous estimate. Private investment was projected to expand only 2-3 per cent while public investment was likely to grow by 9-10 per cent.

Export was forecast to grow by 9-12 per cent, up from an earlier forecast of 7.5-10.5 per cent because the economic growth of trading partners was believed to improve to 4.4 per cent. Total consumption projection was unchanged at 3.5-4.5 per cent.

The BOT also revised its economic assumption so that the crude oil price in the Dubai market would be US$58.8 (Bt2,083) a barrel, higher than $56.5 in the previous forecast.

Regional currencies against the greenback were likely to appreciate due to trade surpluses, continuing capital inflows and the weakening dollar.

Meanwhile, Sompop Manarungsan, a member of an economic committee chaired by Deputy Prime Minister Kosit Panpiemras, said after a meeting yesterday that no major economic stimulus is necessary due to sound fundamentals.

Average growth of exports during the past six months since the government has been in office expanded 18 per cent and prices of major farm products such as rice and tapioca are relatively high.

This suggested that the grassroots still has purchasing power, he said.   

Some members wanted the government to give the economy a big boost by injecting funds of up to Bt70 billion, but a majority of the committee did not agree, he said. Most members thought a social project worth Bt10 billion, known as yu dee kin dee ("Live Well, Eat Well"), is enough. Moreover, the grassroots population has high debts hence aggressively boosting consumption may backfire. 

The committee did not want the central bank to make further aggressive rate cuts as this could spark capital outflows if the political situation worsens.

However, Finance Minister Chalongphob Sussangkarn is expected to announce a small economic stimulus package early next month. Expected measures are a reduction of mortgage registration fees and transaction fees as well as soft loans from state-owned banks.  

Anoma Srisukkasem,

Siriporn Chanjindamanee

The Nation