UTCC lifts growth rate to 5.5-6%

The UTCC's earlier estimate was between 5-5.5 per cent, but the government's move to help reduce people's expenses should boost consumer spending in the second half of the year.

Thanawat Polvichai, director of the university's Economic and Business Forecasting Centre, said yesterday that the six measures costing Bt49 billion the government plans to implement are expected to boost economic growth by 0.3-0.5 of a percentage point.

"Easing the cost burden for people will play a major role in driving the economy in the second half, as they will have more disposable income which should encourage private enterprises to expand," he said.

Thanawat said consumer confidence should improve this quarter "due to the improved economic climate" after falling for four months.

However, four major negative factors - rising oil prices, higher interest rates, political instability and a volatile exchange rate - are sure to affect companies.

Dubai crude has been averaging US$120-$129 (Bt4,023-Bt4,324) per barrel this week, compared to $147 per barrel last week, and inflation is ranging between 7.2 per cent to 7.8 per cent.

Thanawat said some businesses were signalling slower growth as costs rise and financial liquidity dries up due to higher interest rates.

Based on the UTCC's survey derived from 820 private enterprises, 90.1 per cent of the respondents said they were affected by rising interest rates. Although 85.5 per cent said they were still able to service their debts, 12.1 per cent said they were less able to repay debts, and the remainder found it easier to pay their debts. The poll was conducted from July 17 to 22.

Yajai Chuwicha, who headed the poll, said that although most respondents could still repay their debts despite higher interest rates, they wanted the government to cap them as rate hikes affect business growth.

Oil prices are also a major factor affecting business growth. Seventy-five per cent of respondents said they were suffering from soaring oil prices. They said they were trying to reduce the impact by shifting to alternative energy sources such as liquefied petroleum gas, gasohol, natural gas for vehicles, and biodiesel.

Regarding the political situation, Yajai said t more than 60 per cent of respondents wanted the government to reshuffle the entire Cabinet, 37.6 per cent only wanted the government to replace some Cabinet members. However, any reshuffle was only expected to slightly improve the stability of the government.