2.2.2 Internal risk factors associated with the economic prospect are as follows:
(1) A recovery of private investment is still uncertain. In 2006, total investment value
of application approved from the Board of Investment (BOI) declined by 34.6 percent which signaled a setback
of investment in 2007. In addition, most investors would wait for a clear direction of political situation
as well as policy guidelines. Current investors' confidence remained low which will exacerbate private
investment not to fully recover despite lowered interest rates. Therefore, it is important for the
government to create and restore investors' confidence of both domestic and international investors by
increasing public relation to provide precise facts as well as implementing supportive measures for
enhancing trade and investment opportunity, for example Mass transit and logistics system development,
Integrated water resource management, Energy and alternative energy investment, Petrochemical industry
investment, Area development for expanding production and investment base.
(2) Adjustment of export-oriented production sector under more stringent trade measures
namely (i) Review for the US's Generalized System of Preferences (GSP) renewal for Thailand's export of
jewelry and precious stone which will consequently lead to tax rate of 6.5 percent (ii) Moreover, the US
will consider whether they will continue cutting the GSP privilege in 2007 on television export because
Thailand's potential on television exports has increased resulting in higher export share. (iii) The EU
countries arrange to announce regulation on Restriction on Hazardous Substances (RoHS) in electrical
appliances and electronic products. The SMEs entrepreneur will, thus, need to adjust themselves to handle
higher cost. (iv) The European Commission plan to regulate exporters of food products and aquatic animal's
food to acquire approval document for detecting dioxins prior to their exports to the EU countries which
will cause higher cost of export
Investment privilege granted by BOI
Value (Billion baht) 2005 2006 January
2006 2007
- Net applications submitted 673.7 514.3 18.4 40.6
(%) (5.7) (-23.7) (-85.5) (120.7)
- Applications approved 571.3 373.5 16.1 39.8
(%) (-4.9) (-34.6) (-25.0) (145.7)
Source: Board of Investment (BOI)
(3) Agricultural products' prices showed a slowdown and will adversely affect farmer's
income, particularly prices of rubber, corn and paddy. During 2004-2005, rising trend of agricultural
prices significantly supported farm income. Nevertheless, agricultural products' prices in the world
market in 2007 tend to slowdown as a result of large price adjustment during last two years. Moreover,
Thai farmers also face with some risks from drought situation due to shortage of rainfalls that could
delay the plantation period and affect agricultural products.
2.3 Key Assumptions for 2007
Projection: Global economic growth World Economic Growth is estimated to be 4.2 percent. Dubai oil
price is expected to be 55 - 60 US dollars per barrel
(1) The world economy in 2007 is likely to grow by 4.2 percent, soften from 4.9 ercent in 2006
and 4.4 percent in 2005. This projection is due to the slowing economic growth of key economies such as the
US,Euro area, China, Japan and Asia, as a result of the tightening monetary and fiscal policies over the
last two years. In addition, this slower growth has resulted from a slowdown in private investment in
electronics which rapidly expanded during 2004 - 2006, and 2004, the impact of high oil prices lingering
since 2004. Therefore, international trade and investment in 2007 is expected to decelerate and less likely
to be a strong economic impulse as in 2005 - 2006.
(2) Dubai Crude oil price is expected to be around 55 -- 60 US dollars per barrel or the average
price of 58 US dollars per barrel, decreasing by 5.7 percent from 61.52 US dollars per barrel in 2006. This
assumption is revised downward slightly from 58 - 62 US dollars per barrel assumed in the projection in
December 6, 2006.
(3) Export and import prices. It is expected that commodities' prices in the global market will
continue to be on an upward trend, but apparently with a decelerating rate, as a result of falling oil and
raw materials prices. Although the demand of commodities and raw materials remains high, the prices were
adjusted significantly in 2006. It can be seen that commodities prices, including steel and rubber and
prices of computer components were already at peak and started to decline at the end of 2006. In addition, a
slowdown in world demand would create intense price competition.
Average export price in US dollar term is assumed to increase by 2.5 percent, falling from earlier
projections of 4.0 percent and decreasing from the growth of 5.2 percent in 2006, as a result of a slowdown
in commodities prices, including price of agricultural products, steel and gold prices, and prices of
electronics and computer components according to the downtrend of the world demand. Import prices are
expected to increase by 3 percent in 2007, decreasing from 6.5 percent in 2006(8). Hence, Thailand's term of
trade will improve and generate positive income effect.
**********************************************************************************************************
(8) BOT has adjusted the export price index and import price index down from 7.7 and 8.0 percent
respectively, following the Ministry of Commerce modification of export and import price index.
**********************************************************************************************************
(Continue to).../2.4 Economic..
(1) A recovery of private investment is still uncertain. In 2006, total investment value
of application approved from the Board of Investment (BOI) declined by 34.6 percent which signaled a setback
of investment in 2007. In addition, most investors would wait for a clear direction of political situation
as well as policy guidelines. Current investors' confidence remained low which will exacerbate private
investment not to fully recover despite lowered interest rates. Therefore, it is important for the
government to create and restore investors' confidence of both domestic and international investors by
increasing public relation to provide precise facts as well as implementing supportive measures for
enhancing trade and investment opportunity, for example Mass transit and logistics system development,
Integrated water resource management, Energy and alternative energy investment, Petrochemical industry
investment, Area development for expanding production and investment base.
(2) Adjustment of export-oriented production sector under more stringent trade measures
namely (i) Review for the US's Generalized System of Preferences (GSP) renewal for Thailand's export of
jewelry and precious stone which will consequently lead to tax rate of 6.5 percent (ii) Moreover, the US
will consider whether they will continue cutting the GSP privilege in 2007 on television export because
Thailand's potential on television exports has increased resulting in higher export share. (iii) The EU
countries arrange to announce regulation on Restriction on Hazardous Substances (RoHS) in electrical
appliances and electronic products. The SMEs entrepreneur will, thus, need to adjust themselves to handle
higher cost. (iv) The European Commission plan to regulate exporters of food products and aquatic animal's
food to acquire approval document for detecting dioxins prior to their exports to the EU countries which
will cause higher cost of export
Investment privilege granted by BOI
Value (Billion baht) 2005 2006 January
2006 2007
- Net applications submitted 673.7 514.3 18.4 40.6
(%) (5.7) (-23.7) (-85.5) (120.7)
- Applications approved 571.3 373.5 16.1 39.8
(%) (-4.9) (-34.6) (-25.0) (145.7)
Source: Board of Investment (BOI)
(3) Agricultural products' prices showed a slowdown and will adversely affect farmer's
income, particularly prices of rubber, corn and paddy. During 2004-2005, rising trend of agricultural
prices significantly supported farm income. Nevertheless, agricultural products' prices in the world
market in 2007 tend to slowdown as a result of large price adjustment during last two years. Moreover,
Thai farmers also face with some risks from drought situation due to shortage of rainfalls that could
delay the plantation period and affect agricultural products.
2.3 Key Assumptions for 2007
Projection: Global economic growth World Economic Growth is estimated to be 4.2 percent. Dubai oil
price is expected to be 55 - 60 US dollars per barrel
(1) The world economy in 2007 is likely to grow by 4.2 percent, soften from 4.9 ercent in 2006
and 4.4 percent in 2005. This projection is due to the slowing economic growth of key economies such as the
US,Euro area, China, Japan and Asia, as a result of the tightening monetary and fiscal policies over the
last two years. In addition, this slower growth has resulted from a slowdown in private investment in
electronics which rapidly expanded during 2004 - 2006, and 2004, the impact of high oil prices lingering
since 2004. Therefore, international trade and investment in 2007 is expected to decelerate and less likely
to be a strong economic impulse as in 2005 - 2006.
(2) Dubai Crude oil price is expected to be around 55 -- 60 US dollars per barrel or the average
price of 58 US dollars per barrel, decreasing by 5.7 percent from 61.52 US dollars per barrel in 2006. This
assumption is revised downward slightly from 58 - 62 US dollars per barrel assumed in the projection in
December 6, 2006.
(3) Export and import prices. It is expected that commodities' prices in the global market will
continue to be on an upward trend, but apparently with a decelerating rate, as a result of falling oil and
raw materials prices. Although the demand of commodities and raw materials remains high, the prices were
adjusted significantly in 2006. It can be seen that commodities prices, including steel and rubber and
prices of computer components were already at peak and started to decline at the end of 2006. In addition, a
slowdown in world demand would create intense price competition.
Average export price in US dollar term is assumed to increase by 2.5 percent, falling from earlier
projections of 4.0 percent and decreasing from the growth of 5.2 percent in 2006, as a result of a slowdown
in commodities prices, including price of agricultural products, steel and gold prices, and prices of
electronics and computer components according to the downtrend of the world demand. Import prices are
expected to increase by 3 percent in 2007, decreasing from 6.5 percent in 2006(8). Hence, Thailand's term of
trade will improve and generate positive income effect.
**********************************************************************************************************
(8) BOT has adjusted the export price index and import price index down from 7.7 and 8.0 percent
respectively, following the Ministry of Commerce modification of export and import price index.
**********************************************************************************************************
(Continue to).../2.4 Economic..