Thai economy to grow despite various risk factors

World Bank: “Thai economy to grow despite various risk factors”

The World Bank today presents a positive view on how the local economy will perform during the remainder of the year.

The outlook of Thai economy in the year 2008 has appeared varied among different agencies with the government recently adjusted its GDP projection upward by half a percentage point last week while many economists saw things otherwise.

However, World Bank economist, Kirida Bhaopichitr, today presented a positive view on the direction of the local economy.

According to the World Bank, Thai GDP is expected to improve despite a palette of internal and external risks.

The World Bank’s latest report on Asia-Pacific economic conditions for 2008 also stated that Thai economy had experienced internal risks from rising inflation and political uncertainties as well as external risks from the global economic slowdown.

And it also supported the Thai government's fiscal measures to stimulate the economy for this year which include tax reductions, village fund disbursements, a debt moratorium and soft loans for low-income people.

The World Bank suggested that for every 10 billion baht the government set aside from the budget for the implementation of these measures Thai GDP will grow by 0.1%.

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Cabinet approves new set of stimulus measures worth more than THB400bil

The Cabinet resolved to approve a new series of economic stimulus measures specifically for low-income earners.

The Cabinet has today approved 6 new measures aimed at boosting grassroots economy.

Deputy Finance Minister, Pradit Pattraprasit, told reporters after the meeting that the newly-approved package includes a 40-billion-baht SML project aimed at 40 million Thais from now and the year 2010 and a 1.6-billion-baht learning fund for 1,600 villages and communities.

Other projects are a 10-billion-baht low-interest mortgage for those whose monthly salary is not more than 15,000 baht and a 17.9-billion-baht two-year debt moratorium for farmers.

The Government Savings Bank also takes part in other measure by setting up a loan target of 5 billion baht for 250,000 Thais across the country in 2008 while the Bank for Agriculture and Agricultural Cooperatives aims to grant as much as 325 billion baht in loans to promote crops that are used for the production of alternative fuel.

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Analysts predict baht to strengthen further and end at THB31.50/US$

International analysts have predicted that the Thai currency would strengthen and end the year higher in 2008.

Analysts from JP Morgan Chase and Co and from UBS all agreed that the baht would likely strengthen further in the near future just like Indonesian Rupiah and Philippine Peso.

Despite a seven-per-cent-plus appreciation of the baht in 2007 and the continuation of its strengthening trend since the beginning of this year the Thai currency has been locked in volatile trade lately.

This is due to their prediction that all central banks would likely be employing the foreign exchange policy as a tool to keep inflationary pressure in check.

Analysts added that stronger currencies would help each country control imports just when Asian exports are predicted to shrink due to sluggish economic condition in the US.

Meanwhile the World Bank commented that the Bank of Thailand would not likely reduce its policy interest rate at its next meeting since the rate cut would affect both the inflation rate and deposit rates.

Still, it maintained that Thailand should not worry about capital influx as interest rates offered in neighboring countries are still higher than those in this country.

SET MONITOR:

Thai share prices rebounded today on improved sentiment sparked by new state economic stimulus package.

The Stock Exchange of Thailand’s main index finished more than 6 points higher at 823 points still with light volume of less than 12 billion baht or about 374.5 million dollars.

Local institutions were the only net seller of 96 million baht or around 3 million dollars.

Foreign investors posted the biggest net buy of 86 million baht or nearly three million dollars followed by retail investors of 10.5 million baht.

The SET composite index added 0.75% at its close as investors hoped for better prospects for the economy after the government approved a 12.7-billion-dollar rural loan scheme.

The stimulus package improved the economic outlook but sentiment was still overshadowed by fears of a slowdown of the US economy.