Somchai
Fears that baht's rapid appreciation will hurt exports
The Finance Ministry's Fiscal Policy Office (FPO) has raised its GDP growth forecast for this year to 5.3 per cent from 5 per cent, driven by private consumption, private investment and government spending, but expressed concern over the baht's rapid appreciation.
At its meeting next Wednesday, the Monetary Policy Committee (MPC) is also expected to raise its 2013 economic growth forecast from 4.9 per cent.
Speaking separately, Roong Poshyananda Mallikamas, an economist at the Bank of Thailand, said economic growth this year was expected to exceed 4.9 per cent, while the inflation rate is expected to be 3 per cent.
According to FPO director Somchai Sujjapong, private consumption is expected to expand by 4.6 per cent, up from a previous estimate of 3.9 per cent, while private investment growth was revised upward to 9.3 per cent from 9.2 per cent. State and state-enterprise investment is now expected to expand by 14.2 per cent, up from 14 per cent.
The economy this year has benefited from the momentum of growth in gross domestic product continuing from the fourth quarter of last year, plus the government's economic stimulus policy, which has fuelled domestic consumption and investment.
However, the FPO is concerned about the rapid appreciation of the baht relative to the currencies of neighbouring countries. For this reason it has revised its forecast for the baht's value this year to Bt29.40 from Bt30.70. In turn, this has prompted it to lower its export-growth target to 9 per cent from 10.5 per cent.
Somchai added that the MPC, taking into account the effect of the strong baht on the export sector, was expected to cut its policy rate. The revised GDP growth forecast for this year is based on the current policy rate of 2.75 per cent.
The FPO director said there was still no sign of an economic bubble, adding that he believed the Bank of Thailand was closely monitoring the situation.
Meanwhile, the central bank's report on economic and monetary conditions in February released yesterday showed that domestic spending, exports and manufacturing production moderated from the previous month after expanding strongly in previous months, partly because of temporary factors such as fewer working days than normal and raw-material constraints. But tourism thrived while overall economic stability was well maintained, with low unemployment, easing inflation and a surplus in the balance of payments, the report said.
Private spending decelerated after a marked pick-up in the preceding period. The Private Consumption Index in February contracted by 0.5 per cent month-on-month, along with a decline in imports of consumer goods, both durable and non-durable, and the associated drop in imports-based value-added-tax collection. Nonetheless, overall VAT collection still expanded, and automobile purchases remained at an exceptionally high level.
The Private Investment Index meanwhile declined by 2.4 per cent month on month on lower capital imports and a drop in permitted commercial construction areas. However, investment in domestic machinery and commercial vehicles continued to grow. Merchandise export value stood at US$17.76 billion (about Bt520 billion), dropping by 3.4 per cent month on month. Agricultural exports suffered from supply constraints, in particular prawn disease, while electronics exports continued to be affected by weak global demand and automobile exports moderated as auto-makers gave priority to the domestic market.
Nevertheless, exports of electrical appliances, particularly air-conditioners, rose as a result of stronger demand from Asean countries and the Middle East.
Tourism was also buoyant, with 2.3 million foreign-tourist arrivals during the month, mainly from China, Malaysia and Russia.
Moderated domestic demand and merchandise exports corresponded to declines in manufacturing production and merchandise imports. The Manufacturing Production Index dropped by 1.4 per cent month on month. Food and beverage production contracted from raw-material constraints, especially sugar cane and prawn. Despite full capacity utilisation, automobile production dropped because of fewer working days, while production of integrated circuits and parts continued to be subdued as global demand remained weak.
Merchandise import value for the month totalled $17.19 billion, declining by 8.9 per cent month on month from all product categories but in particular fuels and capital goods.
Even though private spending moderated, household income remained strong, thanks in part to expanding employment.
On the fiscal side, government spending moderated because many of the extra-budgetary funds had already been transferred in the previous months. Meanwhile, revenue collection decelerated in tandem with a slowdown in overall economic activity. Government spending above revenue collection led to a budget deficit. However, there was a surplus in the non-budgetary balance, so the cash balance registered an overall surplus of Bt1.5 billion.
Economic stability remained sound. Unemployment was low, and headline inflation moderated from the previous month to 3.23 per cent year on year, thanks to a decline in energy prices as well as fresh-food prices as a result of increased supply of vegetables and fruits.
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Article source: http://www.thethailandlinks.com/2013/03/30/fiscal-policy-office-raises-gdp-growth-forecast-to-5-3/
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