Bank of Thailand governor Pridiyathorn Devakula, left, receives an honorary badge from Dr Sumet Tantivechakul, Thammasat University council president. The council voted Pridiyathorn honorary person for 2006. He is a Thammasat University alumni.

MR Pridiyathorn Devakula, governor of the Bank of Thailand, yesterday predicted that the economy this year would grow at least 4.5 per cent yet he called for public and private cooperation to boost private investment and exports.

He said the economy would grow as forecast by the Finance Ministry, driven by expanding exports and private consumption. The ministry's projection is in line with the central bank's growth forecast of 4.25-5.25 per cent.

Speaking at Thammasat University's 72nd anniversary, Pridiyathorn said the economy would be driven by the private sector, particularly exports, despite the delay in implementing the government's 2007 budget.

However, private investment as well as exports should be bolstered to grow at a satisfactory pace in order to ensure steady economic growth, he said. He said that the political vacuum would reduce public investment in the first quarter of the fiscal year, which starts October 1.

"The political factor has slightly affected the economy, which can grow because of the private sector. We should help each other to encourage the private sector to invest and export," said the governor.

Pridiyathorn dismissed comment Olarn Chaiprawat, advisor to caretaker Finance Minister Thanong Bidaya, that the economy this year would grow only 2 per cent, saying his estimates were always far too high or low.

Somchai Jitsuchon, research director for the Thailand Development Research Institute, expressed concern that the government budget could not be spent until March 2007. He said threats of dissolution to the Thai Rak Thai and Democrat parties' could further delay the general election.

He suggested the Budget Bureau found a way to disburse the budget before the actual Budget Act was approved. The carry-over budget accounts only 10-20 per cent of the total budget.

Some economists have complained that some companies were hesitating on investing in their operations due to negative factors despite the fact that many manufacturers are operating at full capacity.

In April, the industrial sector's capacity utilisation was at 71.3 per cent compared with 74 per cent in December but some sectors, such as chemical production, exceeded 100 per cent.

Pridiyathorn said some sectors had begun to expand because they were continuously selling out of products.

The governor also urged exporters to depend to analyse and hedge the value of the baht, which was affected by many currencies, instead of calling for BOT intervention. The currency has been steady for weeks without intervention because of relatively low capital movement, he added.

"If they listen to me, they will see the trend of the baht. They should realise that the baht is not pegged to a single currency," the governor said.

Somchai said a government budget deficit was acceptable if it was caused by the government's investment in mega-projects. However, the budget deficit is not expected to reach Bt200 billion for four or five years. Meanwhile, the current-account deficit will likely increase but will not climb to as high as 4 per cent of GDP in the next four years.

"I earlier forecasted that we would face a government budget deficit some day because of revenue that missed targets," Somchai said. "But the budget should be spent properly."

Anoma Srisukkasem

The Nation