World Bank raises Thailand’s economic growth projection

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World Bank raises Thailand’s economic growth projection

BANGKOK, Oct 20 – The Thai economy is projected to grow up to 7.5 per cent this year against its earlier expectation of 6.1 per cent, bolstered by higher-than-forecast export growth in the first half of the year and increased local consumption, according to Frederico Gil Sander, World Bank economist responsible for Thailand.

He said the export sector and economy are expected to grow at a slower pace in the coming period as the accumulated stock of goods in the production sector had dropped, not because of the stronger baht. He projected the Thai economy next year will expand only 3.2 per cent next year since the economic growth base this year is rather high.

Mr Sander said it would take time for the Thai economy to return to an annual 5 per cent growth rate because economic expansion still relies on international market demand. However, domestic demand is expected to stay high as a result of the continued increase in incomes earned in the agricultural sector.

He said the Bank of Thailand remained capable of supervising the inflation rate efficiently although prices of vegetables are higher. It indicates the central baht still has room to keep the policy interest rate unchanged in order to enhance domestic demand. Because of this, the World Bank believes the Monetary Policy Committee would maintain the policy rate at 1.75 per cent when it meets Wednesday.

He said the real baht value, if inflation is excluded, is not much stronger than other currencies in the region. It showed Thailand’s export competitiveness had not declined. Should the central bank opt to reduce the policy interest rate, it would narrow the interest spread and discourage investors, but it would also help boost domestic spending and simultaneously encourage foreign capital inflows.

Actually, he said, sharp currency appreciation is a problem which many countries, not only Thailand, are facing.
So, it is not easy for Prime Minister Abhisit Vejjajiva and the BoT to control capital movement.

Thailand should give priority to supervising the economy for the long run rather than worrying about short-term problems, he added.

(MCOT online news)