BOT raise growth forecast

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BOT raise growth forecast

SEETALAVAJIT SABAYJAI
THE NATION

BANGKOK: -- The economy is set to see higher growth this year, driven mainly by domestic demand after last year's floods, but downside risks remain in the growth of trading countries, the Bank of Thailand said.

The central bank yesterday raised its 2012 growth estimate to 4.9 per cent from its previous forecast of 4.8 per cent. Gross domestic product is projected to grow by 5.6 per cent in 2013.

In 2012, the economy will likely be driven by domestic demand, including private investment and consumption, and government stimulus measures, as the world economy is slowing down, BOT Assistant Governor Paiboon Kittisrikangwan said.

However, the threat to growth is higher than upside risk this year if Thailand's trading countries see lower-than-expected economic expansion, he noted. The upside risk to the Thai economy will rise if the government's economic stimulus is higher than expected.

"That depends on the global economy, which is expected to grow more than 3 per cent in 2012, and our trading partners are expected to see combined average growth of 4.8 per cent this year," Paiboon said.

The global economy has not entered recession yet even though Europe is already in recession, he said.

"This year's estimated Thai export growth of 7.8 per cent is satisfactory amid the global economic situation now," Paiboon said. Exports grew 16.4 per cent last year.

Given the worst damage in history from last year's floods, the central bank slashed its 2011 GDP growth estimate to 1 per cent. Its loss estimate was revised up to 3.1 per cent of the nation's gross domestic product, up from its forecast of 2.1 per cent in November 2011.

This year's estimate on core inflation has been lowered to 2.2 per cent from the earlier projection of 2.4 per cent. The central bank foresees 2013 core inflation at 1.7 per cent.

The headline inflation forecast for 2012 was also lowered to 3.2 per cent from the previous forecast of 3.5 per cent. The headline figure is expected at 2.9 per cent in 2013.

During the second half of this year, domestic pressure is likely to pick up with recovered demand and the impact of stimulus measures, but will be offset by softened global oil and commodity prices on the back of the global economic slowdown.

"Inflationary pressure is subdued and will tend to return to its normal level in 2013 as the impact from the government measures will likely diminish," Paiboon said.

Factors that need to be monitored are a resolution of the European sovereign-debt crisis, which could affect other countries through the real economic sector and financial markets, and the Thai government's policy on water management, which could affect confidence and the Kingdom's economic recovery.

However, if any positive or negative factors arise, the monetary policy is sufficiently flexible to be adjusted to cope with the changing situation, he said.