Rangsit University bullish on economy next year

Rangsit University bullish on economy next year

The economy will expand between 5.5% and 6.5% next year on strong domestic consumption and private investment, predicts Rangsit University's Economic and Business Research Center for Reform.

However, the forecast runs counter to a consensus by other economists, who put their hopes in the government rather than the private sector.

Centre director Prof Anusorn Tamajai, who is also dean of the economics faculty, said his team is optimistic that 2013 gross domestic product (GDP) growth will come in a full percentage point above the economists' estimate of 4.5% to 5.5%.

He said the rise in the daily minimum wage will increase domestic consumption.

Stronger consumption will in turn boost demand, and then the private sector will expand investment to serve that demand, said Prof Anusorn.

But other economists view the higher daily minimum wage as a threat to the private sector since it puts upward pressure on operating costs.

Prof Anusorn said the centre expects private investment to rise sharply under the Asean Economic Community (AEC) from 2016, as Thailand will serve as a "connector" for other Asean members.

The government has pledged to spend 350 billion baht on water management next year, but under the AEC the government will also need to consider additional infrastructure to serve regional logistics, he said.

Public investment spending rose by 13-14% this year, and next year could see more double-digit growth at 10%, said Prof Anusorn.

Inflation is expected to increase between 3.8% and 4.5%, up from an estimated 3.3% this year, with signs of a bubble in the stock market and property sector, albeit at an insignificant level.

Prof Anusorn said the centre is very optimistic about exports, saying growth of 11% is likely, while imports will increase by 12%, beating economists' projections of zero to 5% for both.

The trade surplus is expected to widen to US$8.9 billion, with the balance of payments in US-dollar terms expected to come in at 1.02% of GDP.

Prof Anusorn said the centre's export growth projection is based on the assumption that the global economy will recover next year, particularly in Europe.

The centre also forecasts global GDP will increase between 3.5% and 3.6%, euro-zone GDP by 0.2% to 0.5% after negative negative growth this year and US GDP by 2.1%.

The US has a high possibility of cutting its fiscal deficit partially and increasing its tax regime, so the risk of that country falling off the "fiscal cliff" is relatively low, said Prof Anusorn.

Despite his optimistic point of view, he said risks do remain, and these are mainly political.

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