Posted on 02 May 2008
First-quarter economic growth remained strong at around 6%, but rising inflation could affect consumer spending and business investment over the next few months, according to the Bank of Thailand.
Amara Sriphayak, a senior director of the central bank's Domestic Economy Department, said growth in the first quarter was projected at around 6%, or higher than the 5.7% year-on-year expansion recorded in the fourth quarter.
But the central bank was monitoring closely recent increases in household expenses, and the potential negative impact they may have on consumer spending and business investment.
Rising consumer product prices could result in lower disposable income for households, which in turn would affect sales of durable goods and the manufacturing sector.
At the same time, rising production costs have affected profit margins and investment plans, with last month's business confidence index falling to 49.6 points from 51.6 the previous month.
Mrs Amara said the Thai economy in the first half continued to expand for the second straight quarter, helped by fiscal stimulus measures approved by the government for businesses, the middle-class and low-income groups.
She said plans to raise minimum wage rates by nine baht per day would not significantly affect inflation trends this year, but that higher wage hikes could result in higher inflation.
Industrial manufacturing rose 12.9% in the first quarter from the same period last year, up from a 12.1% year-on-year increase in the fourth quarter of last year, while private consumption rose 7% in the first quarter from the same period last year.
But the latest data also show that rising prices have begun to have an impact on the economy, with private consumption falling 0.1% in March from last year. Consumption fell -1.7% year-on-year in February.
Private investment also turned negative at -1.5% year-on-year in March, even as investment rose 7.2% year-on-year for the first quarter.
Inflation in the first quarter rose 5% from the same period last year, with core inflation, which excludes food and energy prices, up 1.5%.
Bank lending expanded 5.9% from last year in March, up from 5.3% year-on-year growth the previous month.
Exports remained stable, rising 15.1% in US dollar terms in March to $14.64 billion, with imports rising 31.2% year-on-year to $14.3 billion, resulting in a trade surplus for the month of $342 million. Exports rose by 21.1% for the first quarter, with imports up 34.5%, resulting in a trade deficit of $100 million.
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