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Published on March 27, 2008

Fiscal Policy Office director-general Pannee Sathavarodom said consumers were renewing their spending despite their purchasing power being slightly affected by higher prices. This could be seen in a 6.9-per-cent increase in revenue from value-added tax last month.

Spurring the spending was a 20-per-cent increase in farmers' income in the first two months. Motorcycle sales also returned to the black last month after 12 months of negative sales, expanding 5.6 per cent. She said that overall, private consumption could expand 4 per cent this year, up from growth of 1.4 per cent last year.

Private investment is also expected to resume with imports of machinery and equipment in the first two months. Many firms in the petrochemical, electronics, plastics and paper industries are operating at full capacity, Pannee said.

She predicts private investment will grow 9.7 per cent this year, up from growth of 0.5 per cent last year. The government's Bt42-billion tax-cut package, announced earlier this month, is expected to boost both consumption and investment further.

"Economic growth this year will be well balanced as domestic demand makes a comeback," she said.

Finance Minister Surapong Suebwonglee yesterday told a real-estate seminar more economic-stimulus measures would be launched later this year, particularly in the first half, to extend assistance to sectors other than property.

Surapong said stimulus measures approved by the Cabinet on March 4 to boost property transactions would result in that sector's contribution to GDP rising to 6.57 per cent, or a value of Bt264 billion. Related industries that contribute 20 per cent of GDP will also benefit from the measures, and together they will increase this year's GDP 0.2-0.3 per cent.

Thailand's GDP expanded 4.8 per cent last year, due mainly to growth in exports. However, Pannee said while consumption and investment would pick up, exports could slow down this year, because of the global economic slowdown. The volume of exports is expected to grow 6.9 per cent, down from growth of 7.1 per cent last year.

She said by the end of the year, Thailand should have a trade deficit of US$2.4 billion (Bt75.44 billion), because of imports for investment purposes. The current-account surplus will diminish to $1.5 billion, from $14.9 billion last year. Inflation will pose an economic risk, with the rate climbing to 4.5 per cent from last year's 2.2 per cent, because oil prices are expected to remain high. The average price for Dubai crude is expected to be $93 a barrel, up from $67.80 last year.

The Fiscal Policy Office expects the baht to remain at about 31.50 to the US dollar, and the policy interest rate to drop from 3.25 per cent to 3 per cent this year. Pannee said the office was much more optimistic about the world economy than other researchers, who were concerned about a sharp downturn and its effects on Thailand's exports.

Wichit Chaitrong

The Nation