Published on November 28, 2007
The Finance Ministry is optimistic that real economic growth will be 5 per cent next year, although it will be accompanied by a higher inflation rate of 4 per cent.
"The Finance Ministry upgraded its economic growth projection to 4.5 per cent this year after higher-than-expected export growth last month," Fiscal Policy Office director-general Pannee Sathavarodom said yesterday.
She told a press conference the office had upped its projection to 4.5-per-cent economic growth for this year, from the 3.8 to 4.3 per cent it forecast in August.
Real growth in gross domestic product (GDP) last year was 5 per cent.
Pannee said export growth in US dollars of 26.7 per cent year on year last month and a higher rate of budget disbursement would contribute to increased economic growth.
The office predicts that export growth for the full year will be 15.7 per cent in dollar terms, while export volume will expand 6.4 per cent this year.
She said the government could disburse 93.9 per cent of the previous fiscal year's budget, higher than the target of 93 per cent of planned expenditure of Bt1.57 trillion.
Higher government spending has offset a slowdown in private investment and household consumption.
Private investment is expected to expand only 0.2 per cent this year, while household consumption is projected to rise 1.2 per cent. Consumer and investor confidence has been shaken by political uncertainty, Pannee said.
She expressed optimism about the economic outlook for next year. She said her office forecast growth in a range between 4.5 and 5.5 per cent.
Public investment will be a key driver of growth next year, which will also boost private investment. Public investment is expected to expand by 5.4 per cent and government consumption to rise at the same rate.
Household consumption is expected to rise by 2.5 per cent, while private investment could increase by 5.3 per cent. However, private investment and consumption will still be moderate, Pannee added.
Due to high oil prices, headline inflation is expected to rise to 4 per cent next - up from 2.2 per cent this year. The office made an assumption that the average Dubai crude oil price will rise to US$83 (Bt2,808) per barrel next year, from an estimated average of $67.80 this year.
The current-account surplus is expected to fall to 3.3 per cent of GDP, from an estimated 5 per cent this year.
Export volume is expected to expand 5.5 per cent next year - against 6.4 per cent this year - due to the slowdown of the world economy.
Pannee, however, believes the Kingdom's diversified export markets will cushion the economic slowdown in the United States. Exports to the Middle East are expected to offset a slowdown to the US, she said.
Exports in dollar terms are expected to expand 10.7 per cent next year, down from 15.7 per cent this year, while import volume is predicted to grow 5.8 per cent - up from 3.5 per cent this year.
The office estimates that the combined economies of 14 major trade partners will expand 3.8 per cent next year, down from a projected 4.1 per cent this year.
Meanwhile, the baht is expected to move up from 34.60 per dollar this year to 33.80 next year.
The projection for the policy interest rate is unchanged - at 3.25 per cent until the end of this year.