Thailand’s economy is likely to expand 5.5 per cent this year rather than the 5 per cent forecast earlier, thanks to a pick-up in public and private investment after severe flooding late last year, the Finance Ministry said on Monday.
“We’ve revised up our growth forecast to 5.5 per cent as the economy is returning to normal after the floods,” Somchai Sujjapongse, head of the ministry’s fiscal policy office, told a news conference, adding the forecast was the mid-point of a projected 5.0-6.0 per cent range.
Somchai said the ministry expected the central bank’s benchmark interest rate to rise to 3.25 per cent by the year-end from 3.0 per cent currently because inflationary pressures might increase in the second half.
Finance Minister Kittirat Na Ranong said on March 22 he would prefer to see rates come down by 50 basis points to help businesses and other borrowers. He has also said he was aiming for 7 per cent growth in the economy this year.
The central bank left the policy rate unchanged at 3.0 per cent on March 21, pausing after two cuts totalling 50 basis points to help the economy recover from the floods. It has said the current policy rate is appropriate for growth but has warned about high oil prices, which could stoke inflation.Many economists think the central bank will leave policy on hold at the next meeting in May, and probably all year to support growth.The NESDB planning agency, which compiles Thailand’s official GDP figures, has forecast economic growth of 5.5-6.5 per cent this year and the central bank 5.7 per cent.
The economy grew just 0.1 per cent last year due to the floods, the worst in at least five decades, which devastated big industrial zones north of Bangkok.
More than half of the affected factories have still not reopened, according to the Industry Ministry. Production may not fully recover until the second half.
Somchai said domestic demand would be the main driver of the economy this year as exports were expected to be held down by a slowdown in key markets.
Government investment was expected to jump 12.1 per cent this year, led by spending on water management projects to prevent a repeat of the floods, after an 8.7 per cent fall in 2011.