Growth expected to hit 5% next year on strong exports

Bangkok Post (28 November 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 greater inflation.

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 tight.

''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.

5% growth now seen as achievable

The Nation (28 November 2007)

Fiscal Office expects 4% inflation

The Finance Ministry is optimistic that real economic growth will be 5 per cent next year, although it will be accompanied by a higher inflation rate of 4 per cent.

"The Finance Ministry upgraded its economic growth projection to 4.5 per cent this year after higher-than-expected export growth last month," Fiscal Policy Office director-general Pannee Sathavarodom said yesterday.

She told a press conference the office had upped its projection to 4.5-per-cent economic growth for this year, from the 3.8 to 4.3 per cent it forecast in August.

Real growth in gross domestic product (GDP) last year was 5 per cent.

Pannee said export growth in US dollars of 26.7 per cent year on year last month and a higher rate of budget disbursement would contribute to increased economic growth.

The office predicts that export growth for the full year will be 15.7 per cent in dollar terms, while export volume will expand 6.4 per cent this year.

She said the government could disburse 93.9 per cent of the previous fiscal year's budget, higher than the target of 93 per cent of planned expenditure of Bt1.57 trillion.

Higher government spending has offset a slowdown in private investment and household consumption.

Private investment is expected to expand only 0.2 per cent this year, while household consumption is projected to rise 1.2 per cent. Consumer and investor confidence has been shaken by political uncertainty, Pannee said.

She expressed optimism about the economic outlook for next year. She said her office forecast growth in a range between 4.5 and 5.5 per cent.

Public investment will be a key driver of growth next year, which will also boost private investment. Public investment is expected to expand by 5.4 per cent and government consumption to rise at the same rate.

Household consumption is expected to rise by 2.5 per cent, while private investment could increase by 5.3 per cent. However, private investment and consumption will still be moderate, Pannee added.

Due to high oil prices, headline inflation is expected to rise to 4 per cent next - up from 2.2 per cent this year. The office made an assumption that the average Dubai crude oil price will rise to US$83 (Bt2,808) per barrel next year, from an estimated average of $67.80 this year.
The current-account surplus is expected to fall to 3.3 per cent of GDP, from an estimated 5 per cent this year.

Export volume is expected to expand 5.5 per cent next year - against 6.4 per cent this year - due to the slowdown of the world economy.

Pannee, however, believes the Kingdom's diversified export markets will cushion the economic slowdown in the United States. Exports to the Middle East are expected to offset a slowdown to the US, she said.

Exports in dollar terms are expected to expand 10.7 per cent next year, down from 15.7 per cent this year, while import volume is predicted to grow 5.8 per cent - up from 3.5 per cent this year.

The office estimates that the combined economies of 14 major trade partners will expand 3.8 per cent next year, down from a projected 4.1 per cent this year.

Meanwhile, the baht is expected to move up from 34.60 per dollar this year to 33.80 next year.
The projection for the policy interest rate is unchanged - at 3.25 per cent until the end of this year.

Public and private investment are key

The Nation (28 November 2007)

Is Thailand at the bottom of the down cycle, and can it thus look forward to a domestic demand-led recovery next year after the December 23 election?

It looks increasingly so. But the story is not all rosy. Consumption remains wobbly from the political instability of the past two years. Investment will be the key factor.

"To expect a swift pick-up in household spending is probably too optimistic a proposition," said Frederic Neumann, an economist at Hong Kong Shanghai Banking in Hong Kong in his report entitled "Time to Turn Bullish", published yesterday.

"For this, the electorate appears too traumatised by the turbulent political events over the past two years. In fact, consumer confidence continues to deteriorate even if signs are emerging that the political gridlock is beginning to dissolve. Moreover, low wage growth and rising inflation will keep a lid on private consumption."

The current government of Surayud Chulanont hopes to stimulate consumption by allowing salaries of civil servants and state-enterprise employees to rise 4 per cent. The daily minimum wage of Thai workers will also increase nationwide between Bt1 and Bt7. This in turn will put more purchasing power into consumers' pockets at a time when prices of consumer products and energy and transport costs have been on a sharp upward trend.

But do not expect too much on the consumption side. The key to reviving domestic growth next year should be investment, both public spending and private investment.

"But investment should swing into full force next year after long underperformance. Political stabilisation, low interest rates, and pent-up demand are likely to fuel the rebound in business expenditure. At the same time, the next government, of whatever colour, looks set to raise spending on infrastructure, providing an added boost to fixed capital formation," Neumann said.
MR Pridiyathorn Devakula, former BOT governor and now an economic adviser to the Chart Thai Party, said on Monday that since the new coalition government was likely to stay around for one-and-a-half years, it would likely invest heavily - at least Bt160 billion - on 11 mega-projects, in order to stimulate growth.

He said believes the coalition government will be short-lived because two-thirds of the members of Parliament are somehow linked to the 111 former executives of the defunct Thai Rak Thai Party who have been banned from politics for five years. The major political agenda of the new government will be to push for legislation granting amnesty to those 111 politicians, after which there will be an attempt to rock the boat in order to call a snap election.

Finance Minister Chalongphob Sussangkarn has indicated that companies - particularly in the auto industry - whose investment will be in about US$500 million (Bt16.92 billion), have started submitting applications to the Board of Investment for investment promotional privileges. In Southeast Asia, no other countries match Thailand in the development of the auto industry, because companies like Ford and Honda have made commitments to invest further in Thailand.
Evidence of private-sector recovery can be seen in last month's statistics. While exports jumped 27.7 per cent year on year to $14.52 billion, imports also surged 20.2 per cent to $13.02 billion, DBS Research reported on Monday. The high-growth figures for imports, which are mostly capital goods, reflect a recovery in the manufacturing sector going forward as industries restock their capital goods for production.

Thailand's trade surplus, which stood at $9.9 billion in the first 10 months of the year, will narrow next year with a fall of net exports as imports rises. But Neumann expects that a rebound in both public and private investment will step in to offset the narrowing trade gap.
"We therefore look for growth to accelerate to 5 per cent in 2008, from roughly 4 per cent this year. Perhaps not the bullish scenario that the country is accustomed to, but still reason enough to turn optimistic," he said.

Big push for LG mobiles

The Nation (28 November 2007)

LG Electronics (Thailand) will spend US$10 million (Bt338 million) next year on marketing its mobile phones, with the hope of doubling its share of the Thai handset market to 8 per cent.

Taweechok Lalitsasivimol, senior manager for the mobile-phone business, yesterday said the company expected to sell 600,000 mobile phones this year and about 1 million next year.

The South Korean-based electronics company also launched a new model yesterday: the LG Viewty, featuring a 5-mega-pixel digital camera. The handset is priced at Bt17,900.

Deputy managing director Alongkorn Chujit said LG planned to sell 10,000 LG Viewty units per month. The target group is affluent tech geeks.

Next year, LG Electronics will roll out more than 40 new mobile-phone models in Thailand, he said.

He believes licences to operate third-generation (3G) broadband wireless spectra will also be awarded in Thailand next year, further boosting sales growth for 3G-capable mobiles.

TOT tells companies to deliver numbers

Bangkok Post (28 November 2007)

The TOT board of directors wants contractors to finish the long-delayed addition of 565,000 telephone numbers and 220,000 broadband connections before the term of the military-appointed government expires.

Col Natee Sukolrat, a board spokesman, said Ericsson and Siemens were supposed to have delivered the 565,000 new numbers in August last year but could not finish on time.

The two companies won the contract in 2005 in an electronic auction with a combined price of 5.799 billion baht.

The project was divided into three zones with Siemens winning Zone 1 covering Bangkok and the northeastern provinces at 2.036 billion baht. Ericsson won Zone 2 (central and southern provinces) at 1.893 billion and Zone 3 (northern and eastern provinces) at 1.870 billion baht.

Col Natee said the board would try to push the two suppliers to deliver the project within the term of the current government so that TOT could determine the fine for late delivery.

The broadband expansion project is being undertaken by Huawei of China.

Col Natee dismissed an earlier report that TOT had decided to fine Siemens 320 million baht and Ericsson 440 million for the late delivery, reasoning that the amounts could not be determined until the work was completed.

The project had been delayed for 400 days, he said, adding that the two suppliers would face a fine of 0.1% of the project value per day.

The suppliers claimed flooding in several parts of the country, and the unrest in the South were major factors that delayed the construction, he said.

But Col Natee admitted that the delay was also due to expansion beyond the original terms of the contract.