(2) In 2008, domestic demand, particularly public and private investment are expected to
expand at a stronger rate, especially in the second half of the year. Key investment projects includes investment in mass transit railway system, automobile industry particularly those received special tax incentives for energysaving car (eco car and E20 car), electronics industry, ethanol production and IPP electricity generation project.
(3) A recovery in domestic spending and investment will help compensate for the export slowdown, and the increase in imports in response to investment pickup. Rising oil prices will pass on the effect to inflation which is expected to be around 3.2 - 3.7 percent. Unemployment rate is expected to be low at 1.5 - 2.0 percent. Current account surplus is expected to be around 7,500 - 10,000 millions US dollar.
2.5 Projection conditions for High and Low case
2.5.1 The high case scenario of 5.5 percent. The economic growth in 2008 is likely to grow by 5.0-5.5 percent with following conditions (i) Global economy expands by 4.0 percent or higher. Meanwhile, Thai
export will continue to be restructured to gain higher competitiveness, under higher restrictions, with the
expected growth of 12.0-15.0 percent and tourism receipts will expand around 6.0 - 7.0 percent, (ii)
The disbursement of public spending is no less than 85 percent of overall government and SOE investment budget. Priorities should be made on speeding up budget disbursement of projects implemented for supporting low-income people on their occupational development, and infrastructure development, (iii) Consumer and business confidences under the new government administration improve and could stimulate household spending to recover back to normal trend and stimulate business sector to expand their investment, especially those approval projects from BOI, and (iv) Oil prices trend down during the second half of the year due to world economic slowdown. Average Dubai oil prices for the whole year is expected to be 85 US dollar per barrel or
lower.
2.5.2 The low case scenario of 4.5 percent or below. The economy in 2008 will expand by 4.5
percent under the case of (i) Global economy decelerates more than expected and records lower growth than 3.5 percent due to rising oil prices and ongoing non-performing loans problem in the US and Europe which could dampen export and tourism growth, (ii) The disbursement rate of government and SOEs is below 80 percent, and (iii) Average Dubai oil prices is above 85 US dollar per barrel.
2.6 Projected growth components in 2008
2.6.1 Demand side: growth contribution from domestic and external demand is expected to be
more balanced in 2008, with domestic demand playing a more significant role in supporting growth than in 2007. Meanwhile, net export of goods and services is expected to slow down and thus contributing less to GDP growth in 2008. Growth components in 2008 are projected as follows:
(1) Total consumption expenditure is projected to increase by 4.7 percent, moderately greater
than 2.7 percent expansion recorded in 2007. Specifically, private and public expenditures are expected to rise by 3.8 and 10.0 percent respectively.
(2) Investment is forecast to grow by 6.7 percent, accelerating from 1.4 percent registered in
2007, with contributions from the 6.7 (previously projected at 5.0) and 6.0 percent growth in private and public investments respectively.
(3) Export value in terms of US dollars is forecast to grow by 12 percent (up from previous
projection of 10 percent9), slowing down from 18.1 percent expansion in 2007. Export volume is expected to grow by 6.0 percent with continuing favorable growth recorded for exports of rice, tapioca, foods, electronics, and automobile and parts. However, imports are expected to accelerate noticeably, in tandem with expected expansion in investment and consumption. Imports in US dollar value is projected to increase by 15.4 percent (adjusted upward from the previous projection of 12.5 percent), accelerating from
the 9.6 percent growth registered in 2007.
(4) A surplus of 5.1 billion US dollars in trade balance is expected as a result. Together with
a likely surplus in net services, the current account is likely to record a surplus of approximately 8.6 billion US dollars, equivalent to 3.0 percent of GDP
(5) Inflation is likely to grow at an average of 3.2 — 3.7 percent in out 2008, owing to pressure from increasing oil and raw material prices, upward adjustments in wages, and as well as expected
growth in demand for domestic goods and services. Inflation rate already rose to 4.3 percent in January this year, continuing its upward climb from 3.0 and 3.2 percent in November and December 2007 respectively.
Additionally, rising producer price index will precipitate an upward pressure on consumer prices in 2008, whereby the Ministry of Commerce already approved gradual price increases in several goods categories, taking
effect from October 2007, including dairy products, instant coffee, vegetable cooking oil, fish sauce, canned fish, soft drinks, passenger cars and motor cycles. In the meantime, certain items such as LPG gas, detergents, artificial fertilizers and tires are lining up for price increase.
3. Economic Policy Management for 2008
The economic management in 2008 under the new government administration should focus on maintaining economic stability in the environment of rising oil prices and global economic slowdown as well as building strong foundation for sustainable economic growth in the long run, with key principles including, enhancing productivity, value creation in order to be more competitive, improving energy efficiency, strengthening domestic economy and develop sound economic foundation for local communities as well as supporting people’s well being. Management guidelines are as follows:
3.1 Building up investors’ confidence by speeding up public investment projects to improve infrastructure, especially the mass transit system in Bangkok and vicinities in order to increase energy efficiency, and to improve productivity in the long run. The government should also give priority to the
development of logistics system. In addition, it is imperative to expedite the amendment of laws,
rules and regulations, which are considered as hurdles for private investment. Moreover, implementation of the “2008-2009 Year for Investment” scheme must be pursued systematically and continuously.
3.2 Accelerating budget disbursement in FY 2008 to achieve target of 94 percent disbursement rate of government budget (especially the budget for well-being strategy and improvement of communities’
potential including projects implementation to alleviate poverty and to strengthen SMEs). SOEs’
investment budget is set to be disbursed by at least 90 percent. This scheme of implementation must
be carried out in parallel with the implementation of provincial and provincial cluster development
plan.
3.3 Promoting new export markets, in particular those countries in the Middle East, Africa and Eastern Europe. In addition, it is necessary for Thailand to strictly improve quality and safety standards of
products especially food products.
3.4 Promoting tourism sector to strive from a slowdown in 2007 under the campaign of “the 2008-2009
years of tourism” for Thailand.
3.5 Driving measures on energy efficiency improvement continuously as well as promoting uses of
alternative energy to meet the plan for E10/95, E10/91, E20/95, B2 and B5 consumption targets. Moreover, it is crucial to strengthen energy security, both from alternative energy development in the domestic market and build-up network collaboration with regional energy hub.
3.6 Establishing mechanisms to support business adjustment in various sectors including SMEs that
have been severely affected by changing global supply chain. The mechanisms include, for example, the extension of timeframe for the remaining 3,779 million baht of SMEs Fund.
(Continue to).../Economic Projection of 2008..