Posted on 30 Apr 2010
The Bank of Thailand yesterday raised its growth forecast for the year to 4.3% to 5.8%, thanks to expectations of stronger exports on the back of the global economic recovery.
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The new forecast, published in the bank's April Inflation Report, compares with a forecast range of 3.3% to 5.3% released in January and also accounts for the negative impact that political instability is projected to have on tourism and domestic consumption.
''The new GDP (gross domestic product) forecast has already priced in political risk,'' said Paiboon Kittisrikangwan, an assistant central bank governor.
''If [politics] is excluded, GDP growth may increase by another 0.9 percentage points.''
Economic growth for next year, meanwhile, is now forecast in a range of 3% to 5%, against a previous forecast of 2.8% to 4.8%.
The red-shirt protests in
Tourism from last month to the year-end is projected to decline by 7% against the same period last year, compared with original forecasts of 4% expansion.
Political instability would also have a negative impact on domestic consumption and investment trends.
The central bank estimates private consumption growth over the last three quarters of the year will rise by an average of 2.5% quarter-on-quarter on an annualised basis, against 5.3% growth normally.
Investment, which had otherwise been forecast to rise an annualised 8.9% quarter-on-quarter over the last three quarters of the year, is now projected to average 5.1% growth.
Mr Paiboon said key risks for the Thai economy included domestic politics, delays in new industrial projects at Map Ta Phut and the global economic recovery.
Exports would remain the main driver of the Thai economy this year, and help offset the negative impact of politics on economic growth. The central bank's Monetary Policy Committee projects a relatively low probability of a severe political disruption resulting in growth falling outside the 4.3% to 5.8% forecast.
The MPC estimates inflation this year at 3.3% to 4.8%, compared with a January forecast of 3% to 5%. Inflation next year is projected at 2.3% to 4.3%, compared with a previous estimate of 2% to 4%.
Core inflation, which excludes food and energy prices, is forecast at 1% to 2% this year and 2% to 3% in 2011. The central bank had previously estimated core inflation at 1.3% to 2.3% this year and 1.8% to 2.8% in 2011.
The growth forecasts are more optimistic than most. The Inflation Report notes that the average forecast of six private investment houses and banks call for growth of 3.5% this year and 3.1% in 2011. The National Economic and Social Development Board in February projected GDP growth this year at 3% to 4%.
Pimonwan Mahujchariyawong, an assistant managing director at
If political instability eases by mid-year, the overall impact on the economy would be equivalent to a half percentage point on growth for the full year, she said, adding that a quick resolution to the political divide seemed unlikely.
''If the uncertainties last the entire year, it could cut growth by almost two full percentage points. We could actually see the fourth quarter turn negative on a year-on-year basis, as it represents the peak season for tourism which in itself accounts for 6% of GDP,'' Mrs Pimonwan said. ''
[Politics] may also affect investor confidence, drag down domestic demand and result in delays in government spending. As a result, the economy will depend on exports.''
