Despite local political disruption and problems regarding the application of environmental regulations juxtaposed with investment incentives at the sprawling Map Ta Phut Industrial Estate, the Thai economy is expected to grow 6 per cent in 2010, according to Kosit Panpiemras, chairman of the Board of Executive Directors of Bangkok Bank, Thailand’s largest commercial bank.
His projection that the local economy will grow by 6 per cent this year in line with the government’s earlier forecast.
Mr Kosit said he is uncertain that Thailand’s economy this year can grow as much as 7 per cent as projected by the International Monetary Fund due to anti-government protests which were dispersed in a military operation on May 19 and the yet unresolved Map Ta Phut Industrial Estate environmental regulation problem.
Thailand’s economy is likely to grow 7 per cent this year since the gross domestic product (GDP) is forecast to expand satisfactorily, according to Permanent Secretary for Finance Sathit Limpongpan.
Speaking of the upward revision of this year’s Thai economic growth estimate by the International Monetary Fund to 7 per cent, he said the projection could not be ruled out given improvements in many categories of the economy.
Mr Sathit said the Finance Ministry forecast the country’s economy will expand more than 6 per cent this year against the 5.5-6 per cent expected earlier, but at present, the economic conditions show a clear sign of recovery.
Thailand’s GDP is projected to grow satisfactorily due to significant export growth earlier this year.
Domestic consumption had tapered off, but imports of capital goods and machinery have surged. It reflected the increased production capacity of the industrial sector.
The slower-than-expected implementation of the infrastructure-focused second stimulus package should help limit the fiscal deficit to 2.2 percent in 2010, from 4.4 percent in 2009. Government debt is projected to decline to about 44 percent of GDP from 45.2 percent in September 2009. Foreign exchange reserves, already equivalent to 13 months’ import cover, should rise further as the current account remains in surplus. Inflation is likely to remain subdued given the slack in domestic demand, and policy rates will rise only modestly and gradually during 2010.
Risks to the inflation outlook include the tight labor markets, with firms reporting difficulties in finding workers and increasing reliance on foreign workers. The central bank is likely to continue to limit exchange rate appreciation amid concerns that the country will lose competitiveness against China, given that the renminbi has been effectively re-pegged to the dollar since mid-2008. Concerns about exchange rate appreciation appear to have led the central bank to start liberalizing the financial account of late, making it easier for residents to invest abroad.