The Bank of Thailand (BoT) has revised its growth forecast for this year upward by 0.3 per cent to 4.9 per cent, giving credit to rising exports, private consumption and investment, said Paiboon Kittisrikangwan, BoT Assistant Governor.
The bank said in its monetary policy report that Thailand’s growth projection was revised upward for last year and this year is still driven mainly by private consumption and investment. Last year’s growth forecast was revised up to 5.9 per cent from the earlier projected at 5.7 per cent. This year’s growth forecast was revised up to 4.9 per cent from 4.6 per cent while next year’s GDP is forecast to grow 4.8 per cent.
Mr Paiboon said the global economic risks in the worse-case scenario have declined, given the lower probability of Greece’s exit from the euro area and the recent progresses on fiscal concerns in the US Exports still suffer from the global slowdown, but seem to have bottomed out and show incipient signs of recovery.
State and private investment positive factors for economic growth
Private and state investment is likely to expand 12.1 per cent and 17.1 per cent respectively. However, the government must invest within the timeframe to avoid any adverse effect on the latest growth forecast, he said. This latest forecast, however, has yet included Bt2.2 trillion investment in basic infrastructure as it is still unclear and needs time for implementation.
A risk factor for the Thai economy which needs to be monitored is the fluctuation of fund flows, which may influence the currency exchange rate.
The rapid appreciation of the Thai baht may be short-lived but it benefits the imports of heavy machinery. Other risk factors are acceleration of credit and household debt and results of the second round of minimum wage rises, which is initially assessed to not impact inflation, but small enterprises could go out of business.
The central bank maintains this year’s inflation forecast at 2.8 per cent for headline inflation and 1.7 for core inflation. (MCOT online news) Thai central bank revises 2013 growth forecast to 4.9% | MCOT.net
Bank of Thailand to monitor Thai currency appreciation
Payungsak Chatsuthipol, chairman of the Federation of Thai Industies (FTI), said the latest exchange rate of Bt29.70 to the US dollar was the strongest in 16 months and stronger than the currencies of Thailand’s trading partners in the region.
The rapid strengthening negatively impacts Thailand’s competitiveness but the private sector believes the Bank of Thailand (BoT) is closely monitoring the currency movement, he said.
He said the private sector had predicted stronger Thai currency but they only wish the appreciation of Thai and regional currencies is in tandem.Mr Payungsuk urged Thai exporters and industrialists to keep a close watch on currency exchange which has a vital role in business risk in addition to the global economy and oil prices. BoT Governor Prasarn Trairatvorakul on Thursday refused to say whether the central bank would intervene in the rapidly appreciating baht, but then disclosed that available measures would be executed if necessary. (MCOT online news)
Bank of Thailand official Monetary Policy Report as of January 2013
Mr. Paiboon Kittisrikangwan, Assistant Governor of the Bank of Thailand (BOT), announcesthat the Monetary Policy Committee (MPC) has released the January 2013 issue of the Monetary Policy Report. The Report is published to enhance public understanding of the BOT’s policy stance, with the main details summarized as follows.
1.Economic outlook
Thailand’s growth was firmer than expected in the second half of 2012, thanks to resilient private demand despite the slowdown in exports. The increased momentum came from continued reconstruction spending, late-year investment after awaiting clarity about the flood, as well as a stronger impact of the government’s first-car scheme. These factors lead to a slight upward revision of economic growth in 2012.
The MPC assesses private demand to continue growing firmly in the period ahead
Private investment outlook, in particular, strengthens from the previous projection thanks to businesses’ capacity expansion to accommodate growing domestic demand, adjustments toward greater capital intensity in production, as well as preparation for opportunity in neighboring countries. Continued support will also come from business confidence, conducive monetary conditions, and the crowding-in effect of public investment projects.
In addition, higher-than-normal momentum in consumption is likely to be sustained for some time, given the impact of the first-car scheme and lowered personal income taxes. Key supportive factors also include favorable income prospects, consumer confidence, fiscal stimulus measures, and accommodative monetary conditions. On the other hand, exports still suffer from the global slowdown, but seem to have bottomed out and show incipient signs of recovery. Growth of manufacturing exports will remain subpar throughout the first half of 2013, before gathering pace in the second half as global demand strengthens, while the tourism sector is expected to grow robustly.
The global economy, which remains fragile, continues to be the major source of risks for Thailand’s growth
Despite weakness in the euro area and Japan, improvements in the U.S. and China will help support global recovery momentum. Meanwhile, global economic risks in the worse-case scenario have declined, given the lower probability of Greece’s exit from the euro area and the recent progresses on fiscal concerns in the U.S. This is changed from the title Inflation Report, which has been used since the Bank of Thailand adopted a flexible inflation targeting framework in 2000.
2. Inflation Outlook
Inflation outlook remains stable and close to the previous projection. Although demand pressure is viewed to increase slightly with strengthened domestic outlook, cost pressure is likely to subside partly from softer outturns of non-fuel commodity prices in late 2012. For global crude oil prices, the MPC views price outlook to stabilize over the projection period, given balanced supply and demand conditions that have not changed much from the previous assessment.
3. Projection for Growth and Inflation
The MPC revises up its growth forecast for 2013, thanks to private demand momentum continuing from the previous year. Meanwhile, exports are projected to recover gradually and contribute more significantly to growth from the second half of 2013 onward, which will help to shore up economic momentum after some fiscal stimulus measures expire. Going forward, the MPC assesses downside risks from the global economy to decline but still remain somewhat elevated. The fan chart for growth thus remains downward-skewed, but to an extent lesser than in the previous projection.
The MPC maintains inflation forecasts for 2013 and projects inflation to stabilize into 2014. Given reduced downside risks from the domestic economy, inflation fan charts are balanced this time, compared to the previous ones that were skewed to the downside.
4. Monetary Policy Outlook
In its meeting on November 28, 2012, the MPC judged the global economy to show signs of stabilization. The Thai economy continued its positive growth momentum, with the global impact limited within export-related sectors. The MPC viewed that as downside risks to growth subsided with inflationary pressure in check, the policy rate was already accommodative and conducive to growth.
The MPC therefore voted unanimously to maintain the policy rate at 2.75 percent per annum, and would stand ready to take appropriate policy action as warranted. In its subsequent meeting on January 9, 2013, the MPC assessed the global economy to recover gradually as expected, with better signs and reduced risks compared to the previous meeting. Thailand’s growth projection was revised up for both 2012 and 2013, still driven mainly by private consumption and investment, while exports showed incipient signs of a broad-based recovery. Inflationary pressure remained stable close to the previous meeting, but the impact of the second-round minimum wage increase warranted monitoring.
With remaining uncertainties in the global economy and inflation projection within target, the MPC viewed the prevailing monetary policy stance to be appropriate in supporting the growth momentum, and thus voted unanimously to maintain the policy rate at 2.75 percent per annum. The MPC would, however, continue to closely monitor financial stability risks that might arise from persistently high credit growth, rising household debt, and volatile capital flows.
About the author
Bangkok Correspondent for Siam News Network. Editor at Thailand Business News
