The Finance Ministry hopes it can upgrade this year's economic-growth projection in August on improving indicators despite lingering baht and oil-price fears.

The ministry has previously forecast 4-per-cent growth for the year.

Permanent secretary Suparut Kawatkul yesterday said the latest figures for tax collections and government spending suggested the economy was perking up.

Preliminary data for tax collections this month look better than the dismal estimates, he said, adding that personal income taxes were expected to rise, while value-added taxes would remain stable.

The average salary of workers rose 7 per cent in the first five months of the year, suggesting that purchasing power remains quite strong. Farmers have also benefited from better prices for their products.

Consumer confidence should pick up, so economic growth in the second half will be higher than in the first half.

The pace of government spending this month continued to accelerate and will add momentum to growth, as will an early general election.

An early election would cause investors and consumers alike to regain confidence in political developments after years of uncertainty.

Private investment has also shown signs of recovery, with higher imports of capital goods and an upturn in the Industrial Index. Exports have been expanding at a double-digit rate, and that is likely to continue for the rest of the year, due to the better-than-expected global economy.

Suparut conceded that the stronger currency remained a threat to domestic consumption, because earnings growth was lower in baht terms. The government needs to keep a close eye on financial-market volatility within the region.

And rising crude-oil prices will aggravate inflation for the rest of the year, with the full-year rate hitting 2.8 per cent.

Crude-oil prices from Dubai have surged 17 per cent this year.

Economic growth is also dependent on the confidence of foreign investors, who closely monitor the government.

"If they're worried about government policies, we must give them a better understanding of the situation," he said.

Persistent violence in the restive deep South still poses a risk to economic growth.

Suparut foresees a trend of falling interest rates.

Fiscal 2007 will end on September 30 with a larger deficit than the budgeted 1.7 per cent of gross domestic product, and the government plans another deficit for the next fiscal year, in order to boost growth.

The government will no longer face delays in budget disbursement like early in this fiscal year, so the thrust of public spending will be maintained, he added.

Wichit Chaitrong

The Nation