The Bank of Thailand yesterday officially signaled a policy-rate hike in the second half of the year but promised to take into account the pace of economic recovery and inflation before making any move.

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BOT hints at rate hike in second half

Demand from businesses have increased rapidly over the years in Thailand

A steep fall in exports caused by the global trade slump drove down industrial production and investment in the first half of 2009. Business and consumer sentiment was further undermined by political tensions. Although there were signs the worst had passed by midyear, the economy is expected to contract by more than was projected in March. Modest growth is seen resuming in 2010. The tempo of recovery will depend in large part on the Government fully implementing two fiscal packages, including a new public investment program. Those plans would be at risk if political disruptions recur. The consumer price index is now forecast to decline this year, before low-level inflation returns next year.

Thailand’s economic growth over the last three decades has been fueled and accompanied by rapid industrialization, urbanization, and by intensified agricultural production and fishing. This growth, which has relied extensively on the country’s abundant and diverse natural resources, has degraded land and water quality, caused the loss of natural habitats, and generated increasing levels of air and water pollution. In response, the Government and people of Thailand have launched new initiatives to improve air and water quality, reforest degraded land, adopt energy efficient technologies and invest in pollution abatement schemes.

A clear policy framework is needed, and the development direction set forth by the policy makers should be based on reliable information on the current status of infrastructure development. Systematic, periodic, and internationally-standard information collection within the infrastructure sector will provide Thai policy makers with good background with which to assess the current situation, identify bottlenecks, set clear policy direction, and prioritize projects more effectively .