BOT raises forecast for GDP growth

Exports are projected to grow by 12-15 per cent, up from 9-12 per cent in the central bank's previous forecast, thanks to the higher-than-expected pace of 18 per cent in the first half of the year. Exports are expected to grow 9-10 per cent in the second half.

However, export growth in dollar terms will possibly be half the forecast amount for the entire year.

BOT assistant governor Suchada Kirakul said the improving economy of trading partners, who are collectively expected to grow by 4.6 per cent, would boost exports.

Only the US economy is expected to grow by a slow 2.2 per cent, compared to the earlier forecast of 2.4 per cent.

Despite projected growth of 9-12 per cent for imports, the accelerating growth of exports will help strengthen the Kingdom's economic stability - increasing the trade and current-account surpluses - leading to higher pressure on the baht to appreciate, Suchada said.

The trade surplus is forecast at US$5.5 billion to $7.5 billion (Bt185.4 billion-Bt252.8 billion), compared with $3 billion to $5 billion predicted previously.

The current-account surplus is projected at $7 billion to $9 billion, up from $4 billion to $6 billion.

Suchada said she was not as much concerned about the appreciation of the baht spurred by real economic growth as by capital inflows. The gradual strengthening of the currency caused by the current-account surplus indicates economic strength, she added.

 "We are not concerned about the appreciating baht from the surplus as much as the speedy capital inflows," she said.

However, she forecast that capital inflows would continue in terms of both foreign direct investment and portfolio investment. She said the Thai bourse remained attractive due to its low price-to-earnings ratio of 12-13 per cent. Foreign investors obtaining investment privileges from Board of Investment (BoI) are likely to switch on the engine, the official said.

In the first half of the year, planned investment totalling Bt244.7 billion by 622 companies was approved for BoI promotion, an increase of 12.3 per cent year on year.

The BOT forecasts that investment will recover significantly in the fourth quarter. Some companies have postponed investment plans despite winning BoI promotional privileges three years ago.

Suchada said overall investment was now projected to grow 1.5-2.5 per cent this year, compared with 4-5 per cent forecast earlier. The forecast for consumption is unchanged at 3.5-4.5 per cent.

She expressed only slight concern about the impact of the appreciating baht on exports, as she believes the economies of trading partners, along with export prices, will play an important role in boosting trade.

"The strong baht will not have much impact on exports if it gets stronger steadily. In addition, export prices are unlikely to rise in the second half of the year [as much as] they did before," she said.

She said a one-per-cent appreciation of the baht would weaken the economy by 0.28 per cent and lessen core and headline inflation by 0.05 per cent.

The BOT yesterday revised its core-inflation projection from 1-2 per cent to 0.8-1.5 per cent this year, but kept headline inflation unchanged at 1.5-2.5 per cent.

Meanwhile, the Finance Ministry's fiscal position in the first nine months of the 2007 fiscal year (to end-June) saw a deficit of Bt41.8 billion, compared to a surplus of Bt31.6 billion in the same period the previous year. The deficit is in spite of a positive performance in the third quarter, when the country recorded a surplus of more than Bt81.8 billion.

Finance Ministry spokesman Somchai Sajjapongse attributed the deficit to rising government spending.

In the third fiscal quarter, revenues were Bt463.65 billion, a rise of 5.9 per cent compared to the same period last year. Expenditure in the same period totalled Bt429.194 billion.

Anoma Srisukkasem

The Nation