The central bank yesterday warned that Thailand should boost its savings to cope with rising investment in the near term, because the gap between savings and investment in the first half of the year fell to only 1.8 per cent of gross domestic product (GDP).

Otherwise, Thailand could be walking down the old path to financial crisis.

Bank of Thailand Governor Tarisa Watanagase said yesterday the Kingdom's total savings level from 2001-06 was 30 per cent of GDP, slightly higher than investment during the same period, which was about 26 per cent of GDP. The gap of about 4 per cent is wider than in the first half of this year.

She said that although the savings rate was higher than the investment rate, the country needed to increase the former, in order to provide for higher investments in the future. Otherwise, this could create structural problems in the long term.

"If investments surpass savings, we'll have to borrow again, and this might cause a repeat of the 1997 economic crisis. So, we need to boost savings," Tarisa said.

In addition, household savings have declined significantly, while debt creation has increased mostly from consumption, such as through the purchase of motorcycles, mobile phones and related services and audio products. Although the household-debt level is still not high, it will be a long-term problem, she said.

"Compared with other countries, Thailand's household savings are still not a concern," she said.

Tarisa said the current-account deficit should not be higher than 3 per cent of GDP.

Kongkiat Opaswongkarn, chairman of the Federation of Thai Capital Market Organisations, said yesterday that the global economy was expected to grow 4.5 per cent. He warned that although the Thai economy next year was likely to grow continuously, business operators still had to adjust themselves to the future changes of financial liberalisation.

He said securities firms had to adjust to the changes by diversifying their businesses, in order to depend less on commission income and boost revenues from investment. He said securities companies in Thailand could be divided into three groups: companies owned by Thai banks, companies owned by foreigners and companies with their own niche.

Government Pension Fund secretary-general Visit Tantisunthorn yesterday said Thai economic growth was expected to be 4.5-5 per cent next year. In addition, exporters must also adjust themselves to the stronger baht.

He said there have been net capital inflows into the Thai stock market with foreign net buy volume as much as Bt10 billion a day or accumulated year-to-date foreign net buy volume at Bt100 billion.

Visit believes foreign investors are expected to inject their money into property funds rather than the bond market, as the BOT recently limited foreign investment in short-term bonds.

Thus, property funds are an alternative investment for them, he said.

However, he warned investors that the returns after the first two-year period, when most property funds offer guarantees, might not be as satisfying as during the guaranteed period.

He said domestic interest

rates were expected to fall 50-75 basis points, in line with falling inflation rates.

Siriporn Chanjindamanee,

Anoma Srisukkasem

The Nation