WB: Thai economy to grow 4.6% in 2007

PARISTA YUTHAMANOP

       Economic growth in most East Asian countries will slow in 2007, in line with a decline in the performances of the region's key trading partners, according to the World Bank. Milan Brahmbhatt, a World Bank senior economist for East Asia and the Pacific, said that East Asian economies, excluding Japan, were expected to post economic growth of slightly more than 7% in 2007, compared with 8% this year, with domestic demand helping to offset a fall in exports.

     Developing economies, including Indonesia, Malaysia, the Philippines and Thailand, will likely grow by 8.7% in 2007, compared with 9.2% this year.

      ''The economic growth forecast of the Organisation for Economic Co-operation and Development, which is 3% this year, is expected to be lower than 2.5% in 2007. And it could even be lower, given the latest data,'' Mr Brahmbhatt said.

     The United States economy slowed sharply to 1.6% growth in the third quarter due to a steep decline in its housing market, he said.

     Meanwhile, Japan suffered an unexpected slowdown in the second quarter, as well as Europe in the third quarter.

     Mr Brahmbhatt noted that Thailand's economic growth, expected to be 4.5% this year, was relatively lower than in most other Southeast Asian countries.

Growth in the region excluding Japan has been driven mainly by exports.

   In 2007, growth in domestic demand including private investment, state spending and private consumption, will help offset impacts from slowing export growth.

    For Thailand, the economy had been affected more by macroeconomic factors than by political instability, he said.

    Kirida Bhaopichitr, a World Bank economist for Thailand, said the economy was expected to record 4.6% growth in 2007.

     High oil prices, lower farm-product prices, less trade partners and the appreciating baht will be key negative factors, although a fall in inflation and strong fiscal spending will benefit the economy.

     Farm-product prices are expected to increase by just 0.5% in 2007, compared with 12% this year. The oil price was likely to remain high at $60 per barrel compared with an average of $65 per barrel this year, Dr Kirida said.

    Meanwhile, exports are expected to grow by 11% next year, slowing from 16% this year. Growth for public investment is expected to reach 7.25% in 2007, compared with 6% this year.

    But growth in private investment in 2007 will be on par with this year due to the oil price, rise in real interest rate and the appreciating baht.

    Additionally, business communities are still concerned about the direction of economic policy, especially in terms of free trade agreements and rules for foreign shareholding.

    Private investment will be constrained by the country's relatively high regulatory burdens, shortage of skilled labour and logistics weaknesses.

    Homi Kharas, the Bank's chief economist for East Asia and the Pacific, said a priority for the region was to strengthen domestic demand to drive strong growth in light of global uncertainties.