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Thai think-tank: Only 4% growth if oil prices keep rising


June 24, 2008

Thai think-tank: Only 4% growth if oil prices keep rising
Thai economy is expected to grow around 4 percent this year instead of the 6 percent growth rate targeted by the government if global oil prices continue increasing, the
state-run Thai News Agency reported Monday, quoting a leading economy institute.

Somchai Chitsuchon, research director for the overall economy and income distribution of the Thailand Development Research Institute (TDRI), said should oil
prices change and drop, the economy is likely to expand 5 percent.

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But what should be of concern now is accelerated inflation in the next three to four months due to a further increase in product and fuel prices.

Somchai said the inflation in the rural areas increased to 13 percent from 7.4 percent four months ago. He warned the government not to accelerate economic growth
nor inject money into the grass-roots level to over stimulate the public's purchasing power because it could fuel inflation.

Should the government attempt to boost consumer purchasing power too greatly, inflation in the areas might surge to 20 percent, he said.

"Now, the actual interest rate is in a negative territory. Should inflation go up considerably, laborers may need to seek a further increase in wages. Likewise with
producers, who want to raise product prices. If the costs of everything are high, the economy will further slow down," Somchai was quoted as saying.

The TDRI executive said he agreed to a possible policy interest rate hike by the Bank of Thailand, but warned the adjustment must be made gradually to prevent
repercussions in the overall economy.

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