ASEAN KEY DESTINATIONS
Politics dictates Thai growth
Prime Minister Abhisit Vejjajiva has repeatedly hinted he might call an election before his administration term ends at the end of 2011, provided a constitutional amendment on election rules is finalised.
Economists expect an election to help ease political tension built up during the massive anti-government protests of March to May this year.
Dr. Prasarn said the peaceful formation of the next government would improve the general investment climate. Businesses want to see that people respect the election outcome, as it increases confidence in the compliance in rules and regulations.
The next government is expected to increase investment in the transportation network and utilities plants because it is an incentive for private investment.
"Private investment remains lower than in the past decade. An improvement will partly depend on public investment taking a leading role, but the budget for public investment has been limited by increases in the government's fixed expenditures," he said.
The central bank expects the economy to grow by 3-5 percent in 2011, slowing from nearly 8 percent this year. The widespread flooding in November will shed 30 billion baht from economic production via farm damages this year.
Global demand appears shaky due to the overhanging banking crisis and high jobless rTE in the United States, in addition to the unfolding fiscal crisis in the euro zone.
"The recoveries in the US, Europe and Japan have not been strong yet. The sustainability of the euro zone will be a challenge if any country has to pull out," Dr Prasarn said. The central bank expects exports to grow by 11-14 percent, domestic consumption 4-5 percent and private investment 8-10 percent in 2011.
Dr Prasarn reaffirmed the central bank would push for interest rate increases in Monetary Policy Committee meetings, as the economy has fully recovered from the downturn.
He said the baht's movement had stabilised the past two weeks as demand to buy and sell the US dollar was balanced.
As for foreign reserve management, the central bank expects to increase its investment in foreign reserves in yuan-denominated assets next year. It has reduced its dollar holdings to less than half.
Meanwhile, Vorapol Sokatiyanurak, director of the Nida Center for Economic Competitiveness Enhancement, said diversified exports and strong potential in the farm and tourism sectors would be cushions for negative factors affecting the economy.
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