FPO sticks with 3.3% growth

FPO sticks with 3.3% growth

Tourism, investment to atone for exports

Tourists take a selfie at Wat Chaiwattanaram in Ayuthaya on July 21, 2016. The robust tourism industry and state investment will keep the Fiscal Policy Office's economic growth projection unchanged this year. (Post Today photo)
Tourists take a selfie at Wat Chaiwattanaram in Ayuthaya on July 21, 2016. The robust tourism industry and state investment will keep the Fiscal Policy Office's economic growth projection unchanged this year. (Post Today photo)

Despite a deeper cut in its export forecast, the Fiscal Policy Office (FPO) has maintained its economic growth projection of 3.3% this year as ramped-up state investment and the robust tourism industry are expected to offset sagging outbound shipments.

The Finance Ministry's think tank has slashed its export forecast this year to a contraction of 1.9% from a decrease of 0.7% predicted in April, director-general Krisada Chinavicharana said.

The revision came after the FPO cut the economic growth estimate of Thailand's 15 major trading partners from 3.49% to 3.3%.

Tourism and government spending and investment are expected to be the main growth engines of the Thai economy, Mr Krisada said.

The FPO raised its forecast for public spending growth from 3.2% to 3.6%. It also raised its public investment estimate from 8.9% to 10.5%.

Its private investment forecast was trimmed from 3% to 2.6%, while its projection for private consumption was raised from 2.1% to 2.3%.

Its forecast for foreign tourist arrivals has been kept unchanged at 33.8 million, up from last year's 29.9 million. Chinese and Russian tourists are expected to show the biggest growth.

The FPO's latest economic growth forecast of 3.3% is above the Bank of Thailand's projection of 3.1% but is in line with the National Economic and Social Development Board's estimated range of 3-3.5%.

The FPO cut its forecast on import growth this year to a 6.5% contraction from a 4.5% decline predicted in April.

The baht is still forecast to be 35.44 to the US dollar by year-end, while its Dubai crude oil price estimate was raised from $35 to $41 a barrel.

The FPO increased its forecast for headline inflation to 0.6% from 0.3% estimated in April.

Kavee Chukitkasem, Kasikorn Securities' assistant managing director, said almost all the economic readings were better than expected and private consumption had gained pace even though the government's recent stimulus to trigger spending over long holidays had expired.

Kasikorn Research Center on Wednesday maintained its 3% economic growth forecast but said the pace of growth could be higher if budget disbursement for public expenditure meets the government's target.

Meanwhile, Chantavarn Sucharitakul, the Bank of Thailand's assistant governor for the financial markets operations group, said investors could change their view on the US Federal Reserve's policy rate manoeuvres after the central bank's latest meeting statement said risks to the US economy had subsided.

Offshore funds have flown into the Thai capital market to park money in the short term after Britain decided to leave the European Union as investors decided a Fed rate increase was not around the corner.

"Volatility of capital mobility is expected to continue in the period ahead, so investors and operators engaged in international trade should closely watch the situation and pay more attention to hedging to prevent risks against foreign exchange, where the direction could change in line with news or forecasts," Mrs Chantavarn said.

She said the shortage in Thailand of British currency had improved since Britain's historic referendum.

As demand for sterling remains high after the Brexit vote, she said it could take time to convert baht into pounds at some commercial banks' branches.

Mrs Chantavarn said Thais who plan to convert baht to sterling for travel purposes can buy travellers' cheques at the same rate as banknotes.

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