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Published on December 26, 2007

Officials suggested the new government increase spending on investment instead of pouring money into boosting consumption.

The economy expanded at a faster rate last month, driven by both high export growth and accelerated consumption, said director-general Pannee Sathavarodom.

Thailand's exports grew 24.4 per cent year on year last month in US-dollar terms.

Pannee said increased collections last month of value-added tax (VAT) indicated that recovery was starting to gain momentum. VAT revenue at constant prices rose 11.3 per cent last month, compared with a growth rate of 4.5 per cent in October. Imports of consumer goods expanded by 42 per cent last month in dollar terms.

Consumer confidence was boosted by more political stability, prospects of future income and rising wages.

However, construction activities slowed down last month. Tax collections from property transactions grew 3.6 per cent year on year, compared with 11.8 per cent in October.

Ekniti Nitithanprapas, a senior economist with the office, said it was normal for full recovery of private investment to occur later than that of household consumption.

Responding to reports that a coalition government led by the People Power Party would increase the salaries of state officials, Pannee said more government spending would boost economic growth next year.

"However, more government spending should be allocated to investment, in which economic growth will be sustainable," she said.

The present government has planned for a fiscal deficit equal to 1.8 per cent of gross domestic product (GDP) in the current fiscal year.

Some politicians want to increase the deficit to 2.5-2.7 per cent of GDP for fiscal 2008 year, which started in October.

Although the outlook for the economy next year is promising, high inflation is a threat.

High oil prices will cause high inflation, and the Fiscal Policy Office predicts that headline inflation will reach 4 per cent next year, based on the assumption of crude-oil prices of US$80 to $85 (Bt2,700 to Bt2,900) per barrel in Dubai.

Wichit Chaitrong, The Nation