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Published on April 18, 2008

Petchanet Pratruangkrai

The Nation

The University of the Thai Chamber of Commerce has revised its growth projection for Thailand's gross domestic product (GDP) this year to 5.1 per cent, worth Bt9.3 trillion, from 4.6 per cent.

The upward estimate has risen from a range of between 4.5 to 5 per cent to between 5 and 5.5 per cent for this year as a result of the government's economic stimulus package, in particular the Small, Medium and Large Community Development Project (SML), which will boost domestic consumption in the second half of this year.

Estimated GDP growth in each quarter is expected be 5.2, 4.9, 4.9 and 5.5 per cent respectively.

The estimates are based on an average Dubai oil price of US$88.5 (Bt2,780) per barrel, a baht value of Bt31.20 to the US dollar, and a stable political situation. Higher estimates of economic growth would pave the way for better consumer confidence and expansion of private investment.

Thanavath Phonvichai, director of the university's Economic and Business Forecasting Centre, yesterday said the government's stimulus package is expected to inject Bt80 billion to Bt100 billion into the economy in the second half of the year.

"The funds will increase domestic consumption and stimulate private investors to spend their money to expand business growth," he said.

Domestic consumption and investment will play a major role in pulling up the economy in the second half of this year, rather than exports which were the key to the economy in the first half. Thanavath explained that exports would show slower growth, from 15-18 per cent in the first half of the year to only 10-12.3 per cent in the second half because of the strengthening of the baht. However, domestic consumption and investment would increase in the second half as a result of the stimulus package which increases the purchasing power of low-income people.

Sectors that would also enjoy benefits from the upward economy are industrial, construction and real estate.

However, rising economic growth will also cause higher annual inflation, up to 4.8 per cent from only 2.3 per cent last year.

"Higher inflation was mainly due to increased oil prices, with every Bt1 domestic oil-price rise increasing inflation by 0.15-0.2 per cent," Thanavath said.

Other factors contributed to higher inflation, including an increase in purchasing ability from the SML project, increased government salaries and minimum labour employment rates, the start of mega-projects and high consumer goods prices in the second half of the year.

To increase consumer's purchasing ability amid higher inflation, Thanavath suggested an increase in the minimum labour rate by 5 per cent, from Bt191 to Bt200 this year. He said the suggested increase of only Bt3 for workers was too small compared to spiralling inflation this year.