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NESDB cuts forecast range

09 Aug 04 , Administrator

139262750_7f8544d178_s The revision followed the release of data showing the economy grew by 4.9% in the second quarter from the year before, down sharply from 6.1% in the first quarter.

The NESDB said slowing growth reflected poor private investment and consumption, expensive fuel prices and rising interest rates.

Ampon Kittiampon, the NESDB secretary-general, said growth in the first half was 5.5% year-on-year, but key negative factors including oil prices, a slow global economy and uncertain domestic political conditions would cause Thailand's economy this year to grow only moderately.

The NESDB said that in the second quarter, exports remained strong, rising in value by 16.3% year-on-year. The trade deficit was 65.8 billion baht.

Net income from services registered a surplus of 54 billion baht as the number of tourist arrivals continued to rise.

Investment grew by only 3.9%, compared with 6.6% in the first quarter, reflecting a slowdown in private investment growth from 7.2% to 3.6%.

Public investment rose to 5% from 4.7%, fuelled by large investments in infrastructure and logistics systems. An acceleration of state disbursements lifted government consumption growth to 3.4% from 0.7% in the first quarter.

Agricultural production expanded by 5.4%, compared with 6.3% in the first quarter, due to poorer results in the crop and fisheries sectors.

The non-agricultural sector rose 4.8%, down from 6.1%, affected by slow growth in manufacturing for exports, and wholesale and retail trade. Growth in household consumption dipped to 3.7% from 4.1%.

NESDB economic indicators for the first seven months of 2006 showed that domestic demand, private investment and consumption remained weak.

Dubai crude oil in the first seven months averaged US$65-68 per barrel, while inflation and interest rates soared. The impact from these negative factors is expected to be felt in the second half of this year.

The NESDB projects the inflation rate for the entire year at between 4.5% and 4.7%. The trade deficit is forecast at $3.7 billion, lower than a previous forecast of $6.1 billion, attributed to high export growth and a slowdown in imports.

Meanwhile, the central bank's Monetary Policy Committee will meet tomorrow to discuss economic trends and set interest-rate policies. The MPC's 14-day repurchase rate currently stands at 5%, and analysts are split on whether to push rates up by a quarter point to curb inflation or maintain current rates to help sustain growth.

"We can't take risks with inflation. I can't say whether interest rates will be adjusted or not; it will depend on where inflation is moving," said M.R. Pridiyathorn Devakula, the central bank governor.

Inflation in August fell to a 14-month low of 3.8% year-on-year, but M.R. Pridiyathorn said August figures to some extent reflected high base effects last year after fuel prices were floated.

"We need to see several more months [of data]. I do not get a sense that [inflation] is falling," he said.

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