- Downward revision on headline inflation rate in 2007 to 2.0-2.5 percent,
from earlier projection of 2.5-3.0 percent. Appreciation of Baht and slowdown in domestic demand lessened
pressure from the increasing oil price and inflation fell rapidly since March. Inflation in the rest of 2007
is less likely to increase at high pace because domestic demand still slow down. Although inflation has
declined, private spending has been revised downward according to: slower-than-expected of private
investment growth which lessens income and employment below anticipated level, slowdown of export revenue in
Baht term, higher oil price and fragile confidence.
- Current account is in surplus of 3.0-4.0 percent of GDP with the most
possibility around 8.5 billion US dollar or 3.6 percent of GDP
(2) The high case scenario of 4.5 percent economic growth
The economy in 2007 will achieve 4.5 percent growth or higher under the following
conditions: (i) Exports sector is competitive under increasing constraints and increase by 14 — 15 percent
and tourism income increases by 6-7 percent (ii) The disbursement of public budget will not be less than 80
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, healthcare
infrastructure and social program (iii) Business confidence improves which will support investment (iv)
Agricultural products’ prices have been maintained at stabilized level with the prevention of output damages
from any natural disaster (v) Average Dubai oil price will not exceed 60 US dollars per barrel.
(3) The low case scenario of 4 percent economic growth or lower
The economy in 2007 will expand according to the low case scenario if: (i) Investment
recovers at slower pace (ii) The disbursement rate of government and SOEs investment budget is lower than 80
percent of total budget (iii) The global economy expands by lower than 4.0 percent which will lead to slower
growth of the Thai’s exports and tourism sector (iv) The average Dubai oil price is above 62 US dollars per
barrel as a result of risks of natural disaster, international political tension, or oil stock of OECD
countries which are below the seasonal trend.
2.5 Probability Distribution of GDP Growth Forecast
Domestic economic conditions suggest that opportunities for investment to recover rapidly are less
than a slow recovery. Government budget disbursements are also needed to be expedited. In addition, the
probability that the averaged Dubai oil price for the whole year of 2007 being lower than 62 dollars per
barrel is likely to be smaller than otherwise. This is due to the fact that the oil prices have already
curbed down during the end of 2006. The world oil demand is also expected to increase, although various
countries have put serious efforts in the development of renewable energy. In addition, there are some
downside risks from the seasonal natural calamities and international conflicts. On the world economic
front, tightening monetary policy implementation will also put constraint to Chinese and Japanese economies
which could expand at slower rate than expected, rather than on the upside. Following stronger-than-expected
Baht currency, export and tourism could also expand at slower than anticipated.
As a result, NESDB forecasts that the probability of the Thai economy expanding higher than the
midpoint of 4.2 percent in 2007 is less than the probability of achieving the lower side of the forecast
range. Thus the asymmetric probability distribution is relatively skewed The probability of achieving the
economic growth of 4.0- 4.5 percent is approximately 76 percent of which the probability of growth forecast
of 4.0-4.2 percent is higher than the probability of the growth forecast of 4.2-4.5 percent. This shows an
adjustment of probability distribution more towards downside risks.
3. Economic Policy Management for 2007
The economic management in 2007 should give priorities to the maintenance of economic stability,
the driving force for smooth economic movement, as well as the balance of economy, for example, productivity
improvement, investment stimulation and the support for adjustment of people and business sector during a
political transition period and an economic slowdown. Therefore, following measures should be recognized:
3.1 Accelerating 2007 government budget disbursement to achieve the goal with no less than 93 percent
disbursement rate for government and no less than 85 percent for SOEs. The disbursement was the
responsibility of Overall Economy Steering Committee and Government Spending Monitoring Committee.
Priorities were given to projects and plans that could allocate budget down through village area and
individuals, for instance, the project of well-being strategies at provincial level, the project of
community development following the Sufficiency Economy approach, and the projects to solve problems in the
three southernmost provinces.
3.2 Preparing for the disbursement of 2008 budget as scheduled, particularly ensuring that the
planned deficit of 120,000 million baht will be allocated for infrastructure projects and others government
project which would strengthen economic foundations
3.3 Creating and restoring confidence of investors, manufacturers, and tourists, especially
solving problems that limit growth of private investment as the follows:
3.3.1 Speeding up government infrastructure project which would increase opportunities
of construction and real estate sectors. Also, speeding up mass transit system project to get bidding at
least 2 lines by August 2007
3.3.2 Accelerating government procedure involved with private investment in order to
start the project within this year, especially the project under consideration of Board of Investment and
the National Environment Board.
3.3.3 Restoring confidence of tourists in uncertain circumstance, especially in
securities matters, in order to boost income from tourism sector to meet target
3.3.4 Supporting development and usage of alternative energy sources, particularly NGV,
Gasohol and Biodiesel
3.4 Creating and restoring confidence in economic and political prospect by focusing on approval
of new constitution as scheduled, implementing the election with transparency and enacting important laws.
(Continue to).../Economic Projection..