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Published on December 4, 2007

The National Economic and Social Development Board (NESDB) has urged the next government to speed up investment projects to boost economic growth to 5 per cent next year following higher-than-expected 4.9-per-cent growth in the third quarter.

The think-tank also called for a good collaboration of fiscal and monetary policies for balanced growth of 4-5 per cent next year without side-effects despite a number of risks.

NESDB secretary-general Ampon Kittiampon said the economy could grow at 5 per cent next year if the new government continues investment projects, particularly the five mass-transit systems, and the private sector speeds up implementation of Bt80-billion worth of petrochemical projects and Board of Investment-approved projects worth Bt500 million.

He said economic growth could be in the upper range if there was no global downturn, export growth could maintain at least 10 per cent and inflation did not exceed 3.5 per cent.

The NESDB projected that public investment would expand by 8 per cent, a 5.8-per-cent expansion, and consumption would grow 4.5 per cent.

Ampon, however, said the government should pursue fiscal discipline by maintaining public debts and budget deficit at proper levels and distributing the budget into productive projects. The budget deficit should not be higher than 2.5 per cent of GDP or Bt160 billion to 170 billion.

"The government should continue with the existing projects and speed up budget disbursement like this year. It should not do anything which could cause shocks," he said.

Ampon said fiscal and monetary policies next year would be important to contribute to economic balance. The authorities, however, should beware of side-effects from policies that could result in an economic slowdown.

"No matter who forms the next government, it should ensure balance in the economy between exports and domestic demand. If there are signs of consumption and investment recovery, the government should not destroy it."

The global economic slowdown, the US sub-prime fiasco and oil-price hikes remain risk factors for the economy. NESDB forecasts that the Dubai oil price will be between US$75 (Bt2,535) and US$80 a barrel and the baht will be in the Bt32-33 range against the greenback.

He said inflation next year could be spurred by both cost-push and demand-pull factors. Investment recovery and capital inflows would create demand-pull inflation, while rising oil prices would bring about cost-push inflation.

"The authorities must pinpoint the main cause of inflation and tackle the problem correctly," said Ampon.

Headline inflation is likely to accelerate in the first quarter and be an average of 3.0-3.5 per cent next year.

In the third quarter, the economy grew at a higher-than-expected pace of 4.9 per cent thanks to export growth, recovery of household spending and private investment, high budget disbursement of 94 per cent and improved tourism.

Anoma Srisukkasem

 The Nation