Vol. V No. 25 - Saturday June 17, - June 23, 2006
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BUSINESS 
HEADLINES [click on headline to view story]:

BOT decides to raise policy interest rate

Key sectors to help boost Thailandís economic growth this year

BOT decides to raise policy interest rate

The Bank of Thailand (BOT)ís Monetary Policy Committee (MPC) has decided to raise the short-term repurchase rate (repo) by 25 basis points from 4.75 percent to a new high of 5 percent, citing it is an appropriate level for curbing the inflation rate and maintaining economic stability.
Atchana Waiquamdee, the BOTís assistant governor in charge of the Monetary Policy Group, said that the MPC agreed at its meeting on Wednesday to raise the 14-day repo with an immediate effect since the inflation rate had soared higher than originally expected due to surging oil prices.
She conceded that demand in the private sector signaled weakness.
This, coupled with a slowdown in state investment, might slow the economic growth in the following period.
Unless there are unexpected incidents, particularly an acceleration of the inflation rate, MPC believes, the current interest rate level is appropriate for maintaining the economic stability, which will also contribute to the economic expansion in the long run.
Mrs. Atchana said the central bank would continue to keep a close watch on rising fuel prices because they are a key factor to accelerate the inflation hike.
She said the MPCís decision to raise the repo was based on an assumption that the crude oil price in Dubai averages US$64 per barrel, compared with US$61.5 per barrel previously.
It is expected that the Dubai crude oil price will edge up to US$65-66 per barrel in the remaining quarters.
Since the inflation rate has risen due to soaring fuel prices and a hike of mini-bus fares and prices of consumersí products under the control list, the basic inflation is likely to exceed a target of 3.5 percent.
At present, the basic inflation rate is staying at 2-3 percent and the general inflation rate at 4.5 percent.
Although MPC decided to raise the repo at the latest meeting, she said, the actual interest rate remains in a negative territory.
The expected rise in the actual interest rate to the positive territory mid-year might not occur because the inflationary pressure is much higher than projected.
She said private investment had markedly slowed because the business sector remains uncertain how the investment demand would increase, given the current oil price hike and political impasse. (TNA)


Key sectors to help boost Thailandís economic growth this year

Thailandís key sectors, including the agriculture, energy, tourism, export and investment sectors, will be major factors to boost the countryís economic growth this year, according to the National Economic and Social Development Board (NESDB).
In a report submitted to the cabinet at its weekly meeting, the national think tank suggested that the government stabilize the growth of the agricultural sector, boost productivity, local tourism, exports and investor confidence, as well as accelerate implementing energy conservation drives in order to support national economic growth later this year.
To stabilize the agricultural sector growth, the NESDB said measures should be implemented to cushion farm product prices and to boost exports of agricultural goods, including rice, fruits, vegetables and other crops, as well as processed food, like chicken and shrimp.
Disbursements of investment budgets of government and state agencies should also be accelerated to stimulate economic activities and growth in the second half of this year and to meet the domestic investment expansion figure of at least 8-10 percent this year as targeted by the government, the NESDB suggested.
The national think tank, however, reported to the cabinet that it had lowered the countryís economic growth rate this year to 4.2-4.9 percent, from 4.5-5.5 percent forecast earlier in March, due to the impact of global oil price hikes, rising inflation to around 4.5-4.7 percent on average this year, increased interest rates and global economic slowdown which could affect Thailandís exports and economic expansion.
The countryís exports are likely to grow 13-15 percent this year, from the governmentís earlier target of 17.5 percent, due to the global economic slowdown, according to the NESDB.
The national think tank suggested as well that when implementing macro economic measures the government should always maintain the fiscal and financial disciplines to keep the countryís key economic sectors in balance and prevent economic stagnation.
The cabinet has, therefore, instructed agencies concerned to implement measures suggested by the NESDB to help boost the countryís economic growth later this year. (TNA)



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