Growth forecast revised upwards
BOT report says private consumption resilient despite export challenges
The Bank of Thailand has revised upward the economic growth forecasts for 2012 and 2013, shrugging off a number of bad signs to the economy, including the fresh spike in the US dollar/baht rate.
The forecasts were revised up from 5.7 per cent to 5.9 per cent in 2012, while the 2013 figure has been raised from 4.6 per cent to 4.9 per cent, according to BOT's Monetary Policy Report released yesterday.
The central bank reiterated the positive view on the growth momentum of private consumption. Though the euro-zone debt crisis remained a big risk to the economy, improvement in the US economy and China's economic rebound is expected to help support demand for the export sector.
"Thailand's growth was firmer than expected in the second half of 2012, thanks to resilient private demand despite the slowdown in exports. The increased momentum came from continued reconstruction spending, late-year investment after awaiting clarity about the floods, as well as stronger impact of the government's first-car scheme. These factors led to a slight upward revision of economic growth in 2012," said BOT Assistant Governor Paiboon Kittisrikangwan.
The MPC message indicated that the central bank would not lower the policy rate from 2.75 per cent, as demanded by exporters. Exporters have reasoned that with a lower interest rate, the amount of foreign funds flowing into Thailand would decline and ease the pressure on the baht. (Full version of the MPC report is available at http://shar.es/4VVkH.)
The baht climbed 1.7 per cent from a week ago to 29.78 per dollar as of 8.30am in Bangkok, according to data compiled by Bloomberg. The currency, which saw little change today, reached 29.72 yesterday, the highest since August 2011. It was headed for a seventh weekly advance, the longest winning stretch since October 2010.
Huge funds are flowing into Thailand's equity and bond markets. The Stock Exchange of Thailand yesterday continued the upward trend, with the SET Index gaining 13.49 points to end the day at 1,434.44 on turnover of Bt60.33 billion. On January 17, foreign investors' transactions in the bond market also accounted for Bt13 billion. Huge funds in the bond market also raised the bond market's daily transaction volume on the day.
According to Asia Plus Securities, the stronger baht has increased the returns for stock investors. The baht yesterday touched 29.65 per dollar, the highest level since July 26, 2011. Based on the lowest point at mid-2012 at 31.87 per dollar, the baht has strengthened by 7 per cent. It estimated that in the past two weeks, foreign inflows to the stock and bond market have nearly hit Bt1 trillion.
The securities house noted that the exchange rate movement could pressure the stock market. If it could be in the range of 29.6-29.8 per dollar, the stock market would not change much. However, if it strengthens further, the market could face a big sell-off.
"At the current SET Index, the market return has risen by 38.5 per cent from end-2011 level. With the addition of foreign exchange gains, returns would exceed 40 per cent," it said.