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Economic growth revised upwards

Economic growth revised upwards

The Bank of Thailand (BoT) revised upward its economic growth forecast for Thailand this year to 7.3- 8 percent, higher than its earlier projection of 6.5-7.5 per cent, according to Assistant Governor Paiboon Kittisrikangwan.

The Thai economy is expected to grow more vigorously due to higher-than-expected economic growth in the first half of this year at 10.6 per cent. The projection factored rising baht but does not include the impact from the ongoing flooding still taking place.

Exports in the first half of this year expanded at a satisfactory level and export growth for the whole year is expected at 25.5-28.5 per cent as the economies of 12 trading partners have improved. Private consumption is likely to drive the economy in the second half of the year, Mr. Paiboon said.

The Thai economy in 2011 is projected to grow at 3-5 per cent thanks to a risk from slow global economy. However, rising baht is not a major factor, compared to growth of trading partners. After the baht appreciation, Thai exporters have recently adapted well. They hedged against foreign exchange risks at 43 per cent in September, up from 35 per cent in August. Moreover, some exporters of particular goods are able to negotiate prices with trading partners using more foreign currencies in payment instead of the US dollar. They have also shortened the period of advance orders from six months to three months.

Regarding the policy interest rate, the BoT assistant governor said the real policy interest rate is negative at 1.25 per cent, which is considered low, in order to stimulate the economy and is in a medium level compared to other countries. However, the low interest rate policy may cause distortion and lead to a real estate bubble. A sign can be seen when investors choose to invest in risky assets, he added.

Headline inflation stays at 2.8-3.8 per cent and core inflation at 0.5-1.3 per cent. Both are likely to increase to 3-5 per cent and 2-3 per cent respectively next year because prices of agricultural products will rise due to this year’s crop losses. (TNA)