Fiscal office cuts growth forecast to 5.5%

The office has also lowered the Kingdom’s predicted export growth this year from 12.8 per cent to 4.5 per cent, in light of the impact from the global downturn, mainly in the US and the European Union.
 However, there are still two key areas driving the Thai economy: domestic consumption and investment. These factors are still posting their highest growth since 2004, with domestic consumption predicted to expand 5.2 per cent this year, and investment by 14.1 per cent, the office said.
 The government’s investment programme is another important economic driver. It is forecast to grow 8.1 per cent for the full year, slightly down on last year’s 8.7-per-cent expansion.
 “Such a downward revision in growth is not so bad; it actually reflects the Thai economy,” director-general Somchai Sajjapong said yesterday.
 Domestic consumption growth has been driven by the agricultural sector, as farmers have increased purchasing power following higher crop prices, particularly for rice as a result of the government’s pledging programme, he said.
 Rice prices have risen by 23.3 per cent, which has led to farming incomes increasing 7.9 per cent.
 The economy experienced a year-on-year contraction of 0.4 per cent in the first quarter, followed by 4.2-per-cent expansion in the second quarter.
 The office forecasts the economy will grow 4 per cent in the current quarter, while double-digit growth is possible in the final three months due to the low base of negative growth of 8.9 per cent in the same period last year.
 The economy has strong fundamental stability with a low unemployment rate of 0.6 per cent and inflation at 2.7 per cent.
In addition, the country’s savings will remain at a record high of Bt6.5 trillion, despite pressure from a stronger baht, said Somchai.
The country’s economic strength is also derived from the high level of new lending by financial institutions, which rose 14.6 per cent year on year in July. Of this new credit, 58 per cent was for the business sector and the remainder for domestic consumption.
The Fiscal Policy Office now also predicts economic growth next year coming in at 5.2 per cent, lower than this year’s level.
Exports next year are forecast to grow by 10.5 per cent, consumption by 4 per cent and private and government investment by 10 per cent.
Two factors boosting economic growth next year are public spending of Bt2 billion for basic infrastructure development and disbursement of Bt350 billion in budgetary spending for water management.
Moreover, the global economy is expected to be in better shape next year, said the fiscal office chief.
The office also predicts that inflation will reach 3.5 per cent next year in line with global fuel demand, driven to a large extent by Asian economic growth.
Thailand is predicted to face a current-account deficit of US$2.6 billion (Bt80.44 billion) next year, against a forecast shortfall of $2 billion this year, he said.
Somchai cited six factors that require close monitoring: serious protests in China against Japan over disputed sovereignty over an island group; protests against the US in Muslim countries; upcoming elections in the US and Germany; establishment of a banking union in the European Union; whether the International Monetary Fund will grant Greece additional lending; and the Indian economic slowdown.