3.4 Economic projection for 2007: 4.0-5.0 percent GDP growth, 3-3.5 percent headline inflation,
and 0.1-0.5 percent of current accountsurplus to GDP
In 2007, Thai economy is expected to expand by4.0-5.0 percent (midpoint of 4.5 percent) slightly
less than 5.0 percent in 2006 as a result of (1) Export slowdown due to a slowdown in world economy,
appreciation of baht and tightened trade measures of trading partners countries (2) Private investment will
not be fully recovered as some investment will be postponed until the next government is becoming more
apparent. As for foreign investors, they will wait for the amendment of Alien Business Act to be completed.
Government investment project is expected to be implemented and disbursed in the second half of the year.
Nevertheless, the economic stability will remain with 1.8 percent unemployment rate, 3-3.5 headline
inflation as a result of lower oil price, appreciation of baht, moderate consumer prices as well as stable
private consumption. The current account(G) is expected to record a slight surplus of 0.1-0.5 percent
of GDP.
(1) The high case scenario of 5 percent economic growth
The economy in 2007 will achieve 5.0 percent growth under the following conditions: (i)
Exports sector is competitive under increasing constraints and tourism income increase by 8-10 percent (ii)
The disbursement of public budget will not be less than 85 percent of total government budget and state
enterprise capital budget. Budget allocation should be prioritized to projects which support low-income
people with career development purpose, infrastructure development and social program (iii) higher business
confidence which will support investment to expand. (iv) Stabilizing agricultural products to support farm
income (v) Average Dubai oilprice will not exceed 60 US dollars per barrel.
(2) The low case scenario of 4 percent economic growth
The economy in 2007 will expand according to the low case scenario if: (i) Investment
recovers at slower pace (ii) Lower-than-expected growth of global economy will lead to slower growth of the
Thai's exports and tourism sector (iii) The average Dubai oil price exceeds 60 US dollars per barrel
3.5 Probability Distribution of GDP Growth Forecast
The probability that the averaged Dubai oil price for the whole year of 2007 will be lower than 60
dollars per barrel is likely to be greater than otherwise. This is because the oil prices have already come
down to below 60 dollar per barrel since September 2006. Although the oil prices are likely to pick up
during winter but the slowing down in the world economy and thus the world oil demand will help contain the
pressure on the oil prices. Moreover, various countries have placed serious effort on the development of
renewable energy and the efforts have already yielded some results in that demand for oil imports have
slowed down. On the world economic front, there are some upside risks associated with the forecast of the
world economic growth. The upside surprises could come from China and Japan, the growth of which could slow
down more mildly than expected and this development could help compensate for the economic slowdown coming
from the US side quite well and thus sustaining the Thai export better than projected. As a result, NESDB
forecasts that the probability of the Thai economy expanding higher than the midpoint of 4.5 percent is
greater than the probability of achieving the lower side of the forecast range. The probability of achieving
the economic growth of 4.0-5.0 percent is approximately 85 percent of which the probability of growth
forecast of 4.5-5.0 percent is higher than the probability of the growth forecast of 4.0-4.5 percent
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(G) Under new definition, 'Reinvested earnings' has been recorded as part of FDI in Financial
account, and its contra entry recorded as 'income on equity' in current account. The series have been
revised back to 2001.
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