The BOT's position is in stark contrast to a gloomy report on Tuesday from the Finance Ministry's Fiscal Policy Office, which revised downwards its forecast for economic growth this year to between 3.8 per cent and 4.3 per cent.

The central bank said private consumption and investment picked up in April following several consecutive months of decline.

The senior director of the BOT's Monetary Policy Group, Amara Sriphayak, said domestic demand had clearly recovered in April, thanks to government spending and lower interest rates.

However, while this economic factor improved, the political factor is still putting pressure on business and consumer confidence.

"Although domestic demand showed a good picture in only one month, it is a good sign for the country," she said. "It will continue to improve if the Constitution Tribunal's rulings are acceptable and the political situation improves."

Economic sentiment also showed an upward trend with the Business Confidence Index rising from 47.1 points in March to 48.2 in April, a move Amara attributed to Prime Minister Surayud Chulanond's announcement of an election date.

She said the recent rate of fall in the Private Consumption Index had eased in April. The index declined by only 0.4 per cent, compared with 1.4 per cent in March.

Many economic indicators are suggesting a recovery in private consumption, particularly collections of value-added tax and imports of consumer goods, she said. VAT collections increased by 5.9 per cent in April, compared with 0.8 per cent in March, and imports of consumer goods grew by 15.7 per cent, compared with 1.1 per cent in March.

The decline in sales of motorcycles and passenger cars also slowed down in April, while electricity consumption grew at a sustainable pace.

Moreover, the Private Investment Index showed a slower pace of reduction of 2.4 per cent year on year in April, compared with a 3.9-per-cent contraction in March.

Amara said imports of capital goods and commercial-car sales indicated an investment recovery. Imports of capital goods increased by 2.8 per cent year on year after recording a 7.9-per-cent contraction in March. Commercial-car sales declined by only 3 per cent, compared with 13.9 per cent in March.

"Investment will improve due to government spending and the downward movement in interest rates," Amara said. "Private investment will jump-start if the government's mega-project investment is implemented."

Government tax collections, particularly of VAT and on international trade, also indicate an improving economic outlook.

Imports in April ensured the recovery of domestic demand as they grew by 11.2 per cent, she added. Imports of consumer goods alone rose by 18.7 per cent year on year, compared with 3.8 per cent in the previous month.

Imports of capital goods rose by 17 per cent, compared with a 6.2-per-cent contraction in March. Even when the cost of importing two aircraft valued at US$214.8 million (Bt7.44 billion) is excluded, total imports of capital goods still escalated by 9 per cent year on year.

Imports of raw materials also rose in April, by 18.9 per cent, in line with export growth.

Amara said exports had continued to grow, although at a slower pace of 16.5 per cent year on year. The volume of exports expanded by 10.3 per cent, but their value grew by only 5.7 per cent.

The BOT expressed confidence in its projection of a current-account surplus of between $4 billion and $6 billion this year, despite April's declining export growth which saw a surplus in the month of $44 million.

The current-account surplus in the first four months of the year was $5.5 billion, in line with the central bank's forecast.

"We expected earlier that the current account would be slightly in surplus or deficit in the second quarter, and we saw in the first month of that quarter that it's quite balanced," Amara said.

Anoma Srisukkasem

The Nation