Thailand 2010 GDP growth could hit 7.5 percent: BOT

The central bank had earlier set the forecast at 4.3-5.8 percent. However, gross domestic product (GDP) now is expected to expand 7 percent in the second quarter, which will push the first-half growth figure to 10 percent. In effect, the revised full-year forecast demonstrates the expectation of less buoyant growth in the latter half.

Growth momentum will continue in the second half, said BOT Assistant Governor Paiboon Kittisrikangwan, but with some risks, particularly uncertainties over global recovery and the European debt crisis. Either factor could slow down exports, Thailand's key economic engine.

At home, despite some stability, the political outlook is not totally smooth. Moreover, all eyes are on the government's handling of the Map Ta Phut case, he said.

The BOT is maintaining its 2011 GDP forecast at 3-5 percent on the basis of strong domestic fundamentals and continued global recovery.

Siam Commercial Bank chief economist Sethaput Suthiwart-narueput noted in a report that Thailand's economy in the first half was boosted mainly by exports. If U.S. domestic consumption does not recover as expected, in light of continuing debt problems in Europe and China's measures to stem economic overheating, this would affect the export sector.

“Looking ahead, the global economy could slow down, and this would affect Thailand in the second half,” he said.

Export value in the first half skyrocketed nearly 40 percent from last year. Manufacturing alone could contribute 6 percentage points to the growth rate in the second quarter, Sethaput said. The rest would come from the service sector, as logistics and trade grew despite the smaller number of tourist arrivals.

Though raising the 2010 GDP forecast, the central bank has lowered the core inflation target, excluding volatile items such as energy and food, to 0.5-1.3 percent, from an earlier forecast of 1-2 percent, thanks to government subsidies and consumer-product price controls. Headline inflation, including volatile items, is also expected to fall to 2.5-3.8 percent, from an earlier forecast of 3.3-4.8 percent.

Next year's target core inflation is maintained at 2-3 percent, while headline inflation is revised up from 2.3-4.3 percent to 2.5-4.5 percent because of the end of government subsidies, higher consumption, and higher wages on a tight labor supply.

“The figures confirm the upward interest trend. Yet it is pure assumption to say to what levels the rates will rise,” Paiboon said. “In practice, the Monetary Policy Committee will thoroughly review data before making a decision, with different sets of data at each meeting, so that the decision best fits the circumstance.”

He also cautioned that thanks to high export income and robust growth in Asia, the baht and other Asian currencies tended to strengthen against the U.S. dollar and ride into greater volatility.

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