Source: Bangkok Post, November 28, 2007
Economic growth should reach 4.5% this year and accelerate
to 5% in 2008, according to a new forecast by the Finance Ministry. The latest
forecast is an increase from the 4% forecast for 2007 made in August. But
inflation is now projected to jump to 4% in 2008 from 2.2% this year, due
largely to the rise in global oil prices.
Pannee Stawarodom, the director-general of the Fiscal Policy
Office, said the economy this year would be driven by strong exports and
accelerated fiscal spending. Growth in 2008 was projected to increase from this
year thanks to a recovery in domestic consumption and continued expansion in
exports, she said.
The new inflation forecast, however, raises the chance that
the central bank's Monetary Policy Committee would keep interest rates
unchanged at its next meeting on Dec 4. The MPC in October kept its one-day
repurchase rate unchanged at 3.25%, citing a slight increase in the risk of
Mrs Pannee said the Finance Ministry's economic projections
were based on a 2008 oil price forecast of $83 per barrel for Dubai crude, compared with an average price
of $67.80 per barrel this year.
One-month futures contracts for Dubai
oil in Singapore
have been quoted this week at $90-91 per barrel, as global supplies remain
''Domestic economic stability faces the risk of rising
inflation,'' Mrs Pannee said.
While the new 2007 growth estimate of 4.5% is higher than
earlier forecasts, growth still remains below the 5% rate posted in 2006, due
to sluggish investment and domestic consumption. Investment this year is
projected to rise 1.5% from last year, with consumption expanding by a modest 0.2%.
Exports are projected to expand 6.4% in volume terms this
year, compared with a 3.5% increase in imports. Government spending this year
is also 9.2% higher than last year, with state investment up 2.9% year-on-year.
The current account, meanwhile, is projected to post a surplus of 5% of GDP for
2007, thanks primarily to record-high exports.
For 2008, private investment is projected to increase 5.3%
from this year, with domestic demand forecast to grow 2.5%. Public consumption,
however, is expected to fall 4.5% in 2008 from this year, although public
investment is likely to grow 4.5%.Export growth is projected to moderate in 2008
from this year, although the current account is forecast to remain in surplus
at 3.3% of GDP.
In any case, Kanit Sangsubhan, the director of the FPO's
Policy Research Institute, played down fears of rising interest rates due to
inflationary pressures. A supply shock from high oil prices was driving
inflation, not greater demand, he said.
Meanwhile, Mrs Pannee said the Finance Ministry was revising
its fiscal policy projections for the next several years. The current five-year
framework, set in 2004, calls for public debt to be maintained at no more than 50%
of gross domestic product.