NESDB raises economic projection to 5.5-6.5%

MONDAY, FEBRUARY 20, 2012
NESDB raises economic projection to 5.5-6.5%

The National Economic and Social Development Board on Monday raised its economic forecast for 2012 to 5.5 to 6.5 per cent, up from the previous projection of 4.5 to 5.5 per cent.

 

For the last two months, Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong has remained firm in his belief that the economy would expand by as much as 7 per cent this year. In February, the Bank of Thailand projected a 4.9 per cent growth rate.

According to Nomura Securities, which expected the 2012 growth rate at 4.1 per cent, weaker-than-expected growth in the fourth quarter as well as a likely increase in public spending this year could introduce an upside to the forecast. It also expected the Bank of Thailand to cut the policy rate by 25 basis points in the March 21 meeting. 
 
Arkhom Termpitayapaisit, secretary general of the NESDB, said at a press conference that the upward revision is attributable to increasing public and private investment in post-flood reconstruction.
Notably, the higher growth rate is based on the assumption that there is no massive flood again this year, he asserted.
Private investment is projected to expand 14.5 per cent, from the 7.2 per cent increase last year. Public investment would expand by 13 per cent, against the 8.7 per cent contraction last year.
He added that recovery of exports and consumption will also support growth this year, while the manufacturing factor, suffering largely from the flood disaster, will fully recover in May or June.
Private consumption is expected to increase by 4.5 per cent, compared to 1.3 per cent last year; and public consumption should expand 3.5 per cent against 1.4 per cent last year. Export of goods would expand 17.2 per cent versus an import expansion rate of 24.3 per cent in dollar terms.
According to the NESDB, the Thai economy contracted by as much as 9 per cent in the fourth quarter compared to the same period a year earlier, due to the drastic fall in the manufacturing sector. This was in stark contrast to a 3.7 per cent increase in the third quarter.
This brought down the 2011 economic growth rate to only 0.1 per cent.
NESDB expects inflation to increase by 3.5-4 per cent from 3.8 per cent last year, due to high food and oil prices.
This is based on the crude oil price of US$105-$110 per barrel.
Thailand is expected to maintain a current account surplus equivalent to 1.2 per cent of gross domestic product. Last year the surplus accounted for 3.4 per cent of GDP.

 
Nomura Securities expected the fourth-quarter economy to contract 5.2 per cent. The actual 9 per cent fall was the largest fall in growth since the third quarter of 1998. Then, the growth plunged 13.9 per cent on year.
 Compared to the third quarter which showed 0.7 per cent growth, the fourth-quarter economy contracted 10.7 per cent.
 "The full-year 2011 growth was just 0.1 per cent against our and the Bank of Thailand’s (BOT) forecast of  1 per cent," it said. 
 In the quarter, exports fell 6.5 per cent on year. Net exports accounted for 6.1 percentage points of the total 9 per cent decline. Domestic demand also contributed negatively, accouting for 2.5 percentage points, to headline growth. Private consumption fell by 3 per cent on year while investment fell by 3.9 per cent.
 In the quarter, public spending also dropped for a seventh straight quarter, down 12.1 per cent on year.
 On the production side, the decline was led by a 10.1 per cent year-on-year drop in the non-agricultural sector from 3.9 per cent in the third quarter. Industrial output also suffered, falling 21.8 per cent on year in the fourth quarter.

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