The economy is expected to rebound after the central bank cuts its policy rate during a meeting of the Monetary Policy Committee on April 11, Pannee Sathavarodom, director-general of the Fiscal Policy Office, said yesterday.

Investors are not making large investments as they wait for the rate cut, she told a press conference.

The Fiscal Policy Office has made an assumption that the Bank of Thailand will cut the one-day repurchase rate to a range of 3.75 to 4.25 per cent this year. If so, economic growth would be about 4 or 4.5 per cent.

Pannee said the Finance Ministry had accelerated public spending last month. It expanded 78.2 per cent to Bt200 billion while tax revenues were Bt103.1 billion. Out of total spending, Bt54 billion was capital spending, which is expected to boost investment in the next two months.

The manufacturing index expanded 6.2 per cent in February, down from

8.2 per cent in January. The deceleration was caused by the sluggish auto and

textiles industries, whose capacity utilisation was down to 62.3 per cent.

However, the agriculture sector expanded 8.7 per cent, compared with 5.3 per cent in January. The farm sector accounts for only 10 per cent of gross domestic product (GDP)

Private investment last month decelerated further as tax collected from property transactions contracted by 0.6 per cent. Applications for investment incentives via the Board of Investment showed signs of improvement, with expansion at 8.7 per cent year on year in value terms.

Consumers were also cautions about spending, indicated by value-added tax collection rising by only 4.6 per cent, compared with growth of 6.9 per cent in January.

Exports expanded 17.7 per cent in US dollar terms in February, resulting in a trade surplus of US$880 million (Bt28.6 billion). The Fiscal Policy Office predicted the country could also have a service account surplus of no less than $1 billion since tourist numbers rose by 6.4 per cent.

Economic fundamentals remained strong as public debt to GDP dropped to 37.4 per cent, well below the target limit of 50 per cent of GDP. Official reserves rose to $68.2 billion, while inflation was 2.3 per cent, down from 3 per cent a month before.

Although crude oil prices are currently rising, the average oil price from January to March 29 was $55.3 per barrel, according to the Fiscal Policy Office.

Wichit Chaitrong

The Nation