Posted on 29 Sep 2008
Economic growth is expected to reach 5.1% this year, down from previous forecasts of 5.6% because of the global economic slowdown, the Fiscal Policy Office said yesterday.
Pannee Stawarodom, the FPO director-general, said that while growth was slowing due to external factors, the Thai economy was still expected to outperform the 4.8% growth rate posted in 2007.
FPO economists said they had reduced their forecasts for economic growth as consumption and investment growth had remained below expectations due to high inflation in the first half of the year and domestic political instability.
Even exports, which have been growing at over 20% to a record high this year, were expected to slow over the next several months with the slowdown in the overall global economy.
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One measure of domestic consumption, value-added tax revenues, grew by 9.5% year-on-year in August, down from 23.3% growth the previous month.
But Mrs Pannee noted that inflation had fallen with global oil prices in recent months, leading the FPO to cut its forecast for the consumer price index to 6.3% for 2008 from earlier projections of 7.2%.
The current account is also projected to remain in surplus this year at 0.4% of gross domestic product, an estimate sharply lower than a previous forecast of a surplus of 1.4% of GDP.
For 2009, the FPO estimates growth of 4% to 5%, with a base case of 4.5% growth. Both domestic demand and investment are projected to rise next year, albeit from a low base.The key economic risks remain the global economy and a potential slowdown in 2009 exports of goods and services.
Thanavath Phonvichai, an economist with the University of the Thai Chamber of Commerce, agreed that exports next year could slow to single-digit growth.
He said the fact that Thailand no longer ranked among the top 15 foreign investment destinations under the latest survey by the United Nations Conference on Trade and Development was a major concern for the country's future growth prospects.
"The government needs to quickly develop new strategies to help support investment. At the least, greater clarity is needed for the infrastructure megaprojects," Mr Thanavath said.
"Investment now stands at just 22% of GDP, or the lowest in 10 years. In 1994, investment was as high as 40% of GDP, and should be at 30% today."
