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Published on April 1, 2008

It said it would keep an eye on prices, along with the impact of the US recession on Thailand's economy.

The Business Sentiment Index fell to 44.8 points in February, down from 45.6 in January, indicating worsening confidence among investors. Their level of confidence for the next three months was also gloomy, particularly regarding business costs, which showed an index figure of only 22 points.

Investors in the service, transport, commerce and manufacturing sectors had lower confidence in the country's economic outlook, because of increases in production and raw-material costs and continuing political uncertainty.

However, Bank of Thailand senior director Amara Sriphayak is optimistic that private investment will continue, because inflation will likely slow down in the second half of the year, and investors are able to adjust their prices to maintain their bottom line.

"Although rising costs will be an upside risk, the business sector still has a certain confidence," she said.

The Private Investment Index expanded 5.6 per cent year on year in February, higher than January's 4.7-per-cent year-on-year growth.

Imports of raw materials and capital goods continued to grow, by 25.5 per cent and 23.7 per cent, respectively, although this was a slower growth rate than in January.

The Private Consumption Index rose 6 per cent year on year in February, compared with an 8.5-per-cent rise in January.

Amara said she doubted that the Car Index, a key component in bolstering private consumption, would temporarily pick up. She expects momentum in domestic demand to continue, particularly if encouraged by the government's economic-stimulus package.

"But higher costs and inflation are factors to be closely monitored," she said.

Anoma Srisukkasem

The Nation