The baht climbed close to an eight-year high yesterday, but the government's financial chief saw little to fear in regard to Thailand's competitiveness.

"The strong baht will slightly affect exports, but there is still no concern. I believe exports will continue to grow as they have done so far. Currency appreciation has been common in the region," Finance Minister and Deputy Premier MR Pridiyathorn Devakula said.

The baht opened at 36.50/36.52 to the US dollar before climbing to the day's peak of 36.38, a level unseen for almost eight years. It closed at 36.40/36.42, breaking the key resistance level of 36.50.

Investors have sold the dollar in offshore markets after several countries said they would diversify their international reserves rather than hold mainly greenbacks.

Dealers said the baht would edge up almost every day and likely pass Bt36 by year's end.

Pridiyathorn said it was not that the baht was that strong, but rather that the dollar had weakened. The central bank has already taken good care of the baht's value, he said.

Exports will expand 11-12 per cent in value next year, he said.

Kirida Bhaopichitr, an economist in the World Bank's office in Bangkok, said the baht would appreciate further next year by 1-1.50.

Usara Wilaipich, senior economist at Standard Chartered Bank (Thai), believes the baht will top 36 this year and continue upwards until the middle of next year.

Kirida also said the economy would grow 4.6 per cent next year, slightly higher than 4.5 per cent this year, due to a slowdown in exports and moderate pick-up in domestic demand.

The economy is likely to grow 4.5 this year, the slowest pace among Southeast and East Asian countries, except Japan.

She said the high oil price, slowdown in global trade and uncertainty surrounding the government's policies could threaten the economy next year. Although the oil price has retracted, it remains high and is expected to average US$60 (Bt2,200) per barrel. The global economic slowdown, with growth of only 3.3 per cent predicted for next year, should cause world trade volume to improve 7.3 per cent.

Private investment next year is likely to increase only 5 per cent, compared with 4.6 per cent this year, because business confidence has not fully recovered, due to high production costs.

Kirida said investors, particularly foreign investors, had become more cautious and postponed their investment decisions until the government's policies became clearer.

The Business Sentiment Index of Japanese companies operating in Thailand, put out by the Japan External Trade Organisation, has been in negative territory since May and declined last month. The Board of Investment saw net applications by foreign firms and joint ventures for the first 10 months of the year drop by half from the same period last year, to Bt260.4 billion.

Kirida said public investment was expected to accelerate next year, due to the 11-per-cent increase in the central government's investment budget and 4.5-per-cent hike in state-enterprise investment for fiscal 2007. But next year's mega-project investment will be Bt366.1 billion lower than planned.

Aberdeen Asset Management deputy CEO Robert Penaloza said most foreign investors felt more conformable going forward after key ministers explained the government's economic policies during their road show last week.

Aberdeen is still overweight in the Thai market, with $1.6 billion worth of investments earning an average annual return of 14-15 per cent. From next Monday to December 1, his company will introduce the open-ended Aberdeen European Growth Fund.

Anoma Srisukkasem,

Somruedi Banchongduang

The Nation