2.4 Economic projection for 2007: 4.0- 5.0 percent GDP growth, 2.5-3.0 percent headline inflation
and 1.0- 1.3 percent of current account surplus to GDP
In 2007, Thai economy is expected to expand by 4.0-5.0 percent (midpoint average of 4.5 percent)
less than 5.0 percent in 2006 as a result of (1) Export slowdown due to a global economic slowdowns,
appreciation of baht and tightened trade measures of trading partners countries (2) Recovery of private
investment is not expected to be fully realized since some investors still wait for a clear direction of the
political situation as well as policy guidelines. Investors' confidence has also remained low which will
affect investment. Moreover, government investment projects are expected to be implemented and disbursed in
the second half of the year. However, it is likely that private consumption will be slightly stronger than
in 2006, as a result of interest rate cuts as well as recent declines in oil prices and inflation.
On stability front, the economic stability will remain favorable with 1.5-2.0 percent of
unemployment rate, 2.5-3.0 percent of headline inflation as a result of lower oil price, baht appreciation,
subdued consumer prices as well as moderate private consumption. Meanwhile, the current account(9) is expected
to record a slight surplus of 1.0-1.3 percent of GDP.
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(9) 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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In all, NESDB's projection range remainsunchanged from the previous forecast on December 6, 2006.
The revisions in the contribution of growth components were made along with the release of the actual data
in 2006. Latest economic indicators in January 2007 showed a continual slowdown of private investment and
higher disbursement of government's current budget during February. Net exports and domestic demand will
contribute to 2007 growth with similar rates as earlier predicted. Both of the components are likely to
contribute less than those of 2006.
The components of 2007 economic growth forecast are as follows:
- Upward revision on government current spending due to speeding up of the disbursement
during the beginning of 2007 and acceleration of budget for the well-being strategies at provincial level
(5,000 million baht) and the budget for community development project following the sufficiency economy
approach (5,000 million baht). It is expected that in 2007, government expenditure at constant prices will
expand by 5.0 percent, higher than earlier projection of 4.0 percent. Meanwhile, expansion of private
consumption will remain the same as earlier projections at 3.8 percent.
- Downward revision on projection of private investment. Latest economic indicators
showed that private investment has not yet recovered. It is expected that private investment will grow by
5.0 percent, down from the previous forecast of 7.0 percent. In the meantime, public investment will
increase by 4.0 percent, same as in the previous forecast.
- Upward revision on export volume growth from 5.0 percent to 5.4 percent in line with
favorable export trends during the end of 2006. Nonetheless, average export prices show slower growth than
expected. The export price is revised downward from the growth rate of 4.0 percent to 2.5 percent. As a
result, export value is revised down from 9.0 percent to 7.9 percent(10).
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(10) A downward revision of export price is partly due to the revision of price data from Ministry
of Commerce. New data from MOC suggest that export price increase at lower rate than the BOT's data.
However, it still showed a slowdown trend in 2007 as expected.
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- Downward revision on import value growth from 9.6 percent to 8.0 percent. This is due
to a downward revision of import price and an upward revision of import volume growth to 5.0 percent (from
4.6 percent). An upward revision of import volume was due to (i) Reductions in inventories in 2006 was
faster than previously expected. It is thus possible to import more raw materials and parts in 2007. (ii)
Stronger export growth (iii) Baht appreciation at faster rate than expected. Nevertheless, import price
slowed down rapidly in the last quarter of 2006 and lower-than-expected oil prices. Thus, growth rate of
import price is revised down from 5.0 percent to 3.0 percent.
- Downward revision on inflation rate in 2007 to 2.5-3.0 percent (from earlier
projection of 3.0-3.5 percent). This is a result of lower-than - expected oil prices and appreciation of
Baht.
- Current account will be in a small surplus of 1.0-1.3 percent of GDP or about 2,400-
3,100 million US dollar.
(Continue to).../(1) The high..