NESDB think thank upbeat GDP will grow 5.5-6.5% this year

The government’s main economic think-tank has maintained an optimistic economic forecast of 5.5-6.5 per cent GDP growth for this year, despite the global financial turmoil, and has urged the central bank to avoid an early tightening of monetary policy.
The economy grew by a moderate 0.3 per cent year on year in the first quarter of this year, recovering from a sharp contraction of 8.9 per cent the in the fourth quarter last year due to the floods, Arkhom Termpittayapaisith, secretary-general of the National Economic and Social Development Board (NESDB), said yesterday.
GDP expanded 11 per cent between January and March from the fourth quarter (October-December) last year after seasonal adjustment, he said.
The agriculture sector, which accounts for 8.6 per cent of the economy, expanded 2.8 per cent, but the non-agricultural sector, which represents 91.4 per cent of the economy, experienced zero-per-cent growth year on year.
GDP growth was driven by consumption, investment and tourism, Arkhom said. Private consumption expenditures increased by 2.7 per cent from a contraction of 2.8 per cent from the previous quarter. Total investment grew by 5.2 per cent, up from a drop of 3.6 per cent in the fourth quarter last year.
“But it did not fully recover from the floods last year as manufacturers, particularly carmakers and electronics manufacturers, had not yet returned to full capacity,” Arkhom said.
Private investment expanded 9.2 per cent in the first quarter, improving from a contraction of 1.3 per cent in previous quarter, but public investment fell 9.6 per cent. Tourist arrivals rose to 5.7 million, up 7.1 per cent from the same period last year. Exports in US dollar terms, however, contracted by 4 per cent.
“A full recovery of the economy is expected to take place in the second quarter,” said Arkhom.
Due to supportive factors, the NESDB has maintained its economic forecast at 5.5-6.5 per cent for the full year, driven by consumption, investment and easing oil-price pressure, according to Arkhom.
Inflation this year is expected to be in a range of 3.4 to 3.8 per cent, he said.
Downside risks are financial volatility stemming from the euro-zone crisis, which could potentially bring the world economy down with it, he said.
The impact of the minimum-wage hike on industries, especially those that are not competitive such as textiles and leather, is also a risk to economic growth, he said.
Meanwhile, the impact of the euro crisis on Thailand’s exports would not be serious, as Europe absorbs only 10 per cent of Thai exports, and Greece only 1 or 2 per cent, said Arkhom.
The world economy is expected to grow between 3.4 and 3.8 per cent, which will support Thai exports, he said.
Arkhom, however, called on the central bank to continue to provide an accommodative policy for growth.
“The central bank should not tighten monetary policy quickly if growth accelerates. This is because consumers have not yet fully recovered from the floods, and last year’s growth rate of 0.1 per cent was a very low base,” said Arkhom.
 The risk of natural disasters, especially flood and drought, would also pose a threat to economy, he added.