BoT increases growth forecast

BoT increases growth forecast
Bangkok Post (20 October 2oo7)

The Bank of Thailand yesterday hiked its 2007 economic growth forecast to between 4.3% and 4.8% from earlier projections of 4% to 5% as exports have exceeded initial projections.

But Suchada Kirakul, an assistant central bank governor, noted that oil prices, which have jumped sharply this month, would remain a risk to growth in the fourth quarter and next year.

The central bank projects inflation at 1.8% to 2.3% this year and 1.5% to 2.8% in 2008, slightly above previous forecasts.

Core inflation, which excludes energy and raw food prices, is expected to stay between 0.8% and 1.3% this year and between 1% and 2% in 2008.

The central bank also maintained its economic growth forecast for 2008 at 4.5% to 6% in its latest Inflation Report.

"The new economic forecast remains close to the previous one as the middle of the new forecast is close to 4.5%. Growth should be slightly lower if the risk for oil prices increases," Mrs Suchada said.

She said the new forecast was based on an assumption that Dubai oil prices would average $68 per barrel in the fourth quarter and $64.6 per barrel for 2007.

Economic growth this year could drop to 4.4% if oil prices in the fourth quarter averaged $75 per barrel, and decline to 4.3% if oil prices average $80.

Mrs Suchada said the central bank expected exports to grow by 13% to 15% this year, up from earlier forecasts of 12% to 15% growth.

Domestic consumption projections, however, were cut to between 2.5% and 3.5% for 2007 compared with earlier estimates of 3.5% to 4.5%. Private investment growth projections were also cut to a range of 3.5% to 4.5% for the full year compared with earlier estimates of 7.5% to 8.5%.

The central bank expects the current account surplus to reach $8.5 to $9.5 billion this year, up from earlier estimates of $7 billion to $9 billion.

Ms Suchada said economic growth for 2008 was expected to reach 5.3% if oil prices ease, but could slow to 4.9% if prices continue to increase.

She said economic growth in the second half of the year was expected to improve from the first half thanks to strong exports and improving business sentiment.

"We earlier expected exports to slow in the third quarter, but this has not been the case. Exports in August and September remained robust," Ms Suchada said. "We have also revised up our forecast for the manufacturing sector. But this is from businesses increasing their inventories."

Ms Suchada said risks for the new inflation forecast include higher prices for oil, farm products and cooking gas.