News Room - Business/Economics

Posted on 13 Dec 2007

Thailand growth hinges on megaprojects

Economic recovery next year will hinge on the progress of the government's investments in megaprojects, says Energy Minister Piyasvasti Amranand. ''Political stability and consumer confidence are just supportive factors. The key driver must be the acceleration of megaprojects such as new mass-transit routes,'' he said.

Most megaprojects have been put on hold, pending the approval of the government, which, as an interim one, has faced various hurdles endorsing investments on such a large scale.

But Dr Piyasvasti said the new elected government would not fare much better in this regard.

The 2007 Constitution calls for comprehensive scrutiny and more time is required in approving such projects.

Moreover, the government must maintain fiscal and monetary disciplines even as it tries to speed up investments.

''The US economic slowdown and sub-prime problems will continue to pressure the debt and equity markets around the world. The Thai bourse will be highly volatile next year,'' he said.

Kasikorn Asset Management predicted that the local economy would grow by 4-5% next year, higher than 4.3-4.6% this year, driven by government investments in megaprojects and renewed consumer spending.

Wiwan Tharahirunchote, the company's executive vice-chairman, said the current account surplus would drop by half to around US$6-7 billion and the baht would continue to strengthen next year. Inflation in 2008 is projected between 2.5% to 3.5%.

Asia is still attractive, with robust economic growth prospect led by China and India.

Foreign inflows would continue to pour into Asia, as the US dollar is getting weaker, prompting fund managers to shift money to other areas that can generate higher returns.

Ms Wiwan predicted that the debt market would see a lot of new supply from government and state-enterprise bonds. To date, the government and state enterprises have planned to issue bonds worth 520 billion baht next year.