BoT's growth view brightens despite slowdown in exports

BoT's growth view brightens despite slowdown in exports

The Bank of Thailand has revised up its economic growth forecast for the year to 5.1% from 4.9% while leaving its inflation forecast almost stable.

Paiboon Kittisrikangwan, an assistant governor, said the central bank includes spending under the government's 2-trillion-baht infrastructure bill in the new forecast.

Under conservative assumptions, the state would be expected to tap 17 billion baht this year, or 40% of a targeted 46 billion.

The Bank of Thailand forecasts the government to use 93 billion out of a targeted 200 billion baht from the bill in 2013, improving the economic growth outlook to 5.1% from the previous 4.9%.

The central bank revised down its export growth forecast to 7.5% from 9% on indicators like weaker advance orders.

Exports are expected to gradually pick up in the second half of the year, driven by slow improvement in the US, increased confidence in Japan and overall stronger Asian economies.

The baht's appreciation so far has not factored negatively in the central bank's export forecast.

"The baht has appreciated rapidly during the past few months, but it is still playing catch-up with regional currencies if movements last year are taken into consideration," said Mr Paiboon.

"While the baht appreciation will decrease exporters' earnings in baht terms, our studies found that orders from trade partners matter more for export growth."

The central bank also revised down its headline inflation forecast to 1.6% from 1.7% for the year, while raising next year's forecast to 1.7% from 1.6%.

The new forecast is based on an expected oil price of US$105 per barrel instead of $110 and easing food prices.

The Commerce Ministry's consumer price index edged down during the past few months in line with prices of prepared foods, said Mr Paiboon.

"Inflation is stable and has a downward trend in the short term," he said.

"But it requires close monitoring in the future considering rising wages, labour supply constraints and a possible increase in oil prices. A good economy might lead firms to raise prices."

The central bank is concerned that a bubble could form in property and financial assets if the banking system's loans remain robust. Credit growth has not sped up so far, said Mr Paiboon.

Under the new forecast, the central bank expects a trade surplus of $1.8 billion this year and a balance in 2014.

The revised forecast also assumes the government's disbursement of 50 billion baht from tied budget and an increase in annual expenditure of 25 billion baht in fiscal 2014.

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