Thai central bank raises 2010 economic growth forecast to 7.3-8%

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The Bank of Thailand has revised upward its economic growth forecast for Thailand this year to 7.3-8 percent, higher than its earlier projection oft 6.5-7.5 percent, according to Assistant Governor Paiboon Kittisrikangwan.

The Thai economy is expected to grow more vigorously due to higher than expected economic growth in the first half of this year, which came in at 10.6 percent.  The projection factored in the baht’s rising value but does not include what impact the major floods will have.

Exports in the first half of this year expanded at a satisfactory level and export growth for the whole year is expected at 25.5-28.5 percent, as the economies of 12 trading partners have improved. Private consumption is likely to drive the economy in the second half of the year, Paiboon said.

After the baht appreciation, Thai exporters have recently adapted well.  They hedged against foreign exchange risks at 43 percent in September, up from 35 percent in August. Moreover, some exporters of particular goods are able to negotiate prices with trading partners using more foreign currencies in payment instead of the US dollar. They have also shortened the period of advance orders from six months to three months.

Regarding the policy interest rate, the BoT assistant governor said the real policy interest rate is negative at 1.25 percent, which is considered low, in order to stimulate the economy and is in a medium level compared to other countries. However, the low interest rate policy may cause distortion and lead to a real estate bubble. A sign can be seen when investors choose to invest in risky assets, he added.

Headline inflation stays at 2.8-3.8 percent and core inflation at 0.5-1.3 percent.  Both are likely to increase to 3-5 percent and 2-3 percent respectively next year because prices of agricultural products will rise due to this year’s crop losses. (MCOT online news)