BOT likely to cut growth forecast

The financial turmoil has spread to financial institutions in the eurozone, as well.

All economic indicators - consumption, investment and exports - have fallen from the previous month, while business confidence has dropped slightly.

Only exports to Japan have shown impressive growth, while export growth to other major markets has decelerated.

"The risk of inflation has dropped, while the risk to economic growth has increased," said Domestic Economy Department director Titanun Mallikamas.

He said several positive and negative factors had emerged over the past few months, such as the government's economic-stimulus package, a drop in oil prices, anti-government protests, the declaration of a state of emergency for Bangkok and the US financial crisis.

The Bank of Thailand said the Business Sentiment Index recorded its lowest pace in 13 months, with 40.7 points in August, down slightly from 41.5 points in July.

All components of the index - performance, orders, investment, employment and production - worsened, but the cost of production declined, due to a drop in oil prices.

The Private Investment Index expanded only 3.8 per cent year on year in August, compared with 4.4 per cent in July.

Titanun said the lower pace of growth was a result of a high base effect and political turmoil. The expansion was driven by only real imports of capital goods, with a 12.7-per-cent rise, while other indicators contracted.

He said cement and commercial car sales, which saw contractions of 17.1 and 25.7 per cent, respectively, were factors to be closely monitored.

The Private Consumption Index rose 7.2 per cent year on year in August, compared with 9.3-per-cent growth in July. It contracted 0.6 per cent from July after marking positive growth in previous months.

Most of the components slowed down, especially vehicle and value-added tax collection.

The central bank said export growth reached 15.5 per cent in August, lower than 43.9-per-cent growth in July. Export volume was down slightly by 0.1 per cent year on year.

Titanun said the slowdown in exports was the result of historical export growth of 43.9 per cent in July.