Thai Central bank is upbeat

The Bank of Thailand is more optimistic about the country's growth this year due to improving global demand and the domestic economic recovery.

In its latest economic forecast, the central bank expects a firmer recovery in the Group of 3 economies, the US, the EU and Japan, than in the previous quarter, while continued fiscal stimulus measures and low interest rates have improved the domestic economy's momentum. Paiboon Kittisrikangwan, an assistant governor, said improving residential property and automobile sales showed that consumption has recovered from a slip due to floods late last year. The central bank expects increases in farm income, the minimum wage and civil servants' salaries will bolster consumers purchasing power this year.

``The low interest rates have helped to spur continuous growth in domestic consumption. Many industries have almost reached their full manufacturing capacity, particularly electronics and automobiles. We normally expect that investment demand will increase in such circumstances,'' said Mr Paiboon.

Exports should hold up this year in terms of value amid a slightly less worrisome forecast for world demand. Exporters adjusting themselves in terms of market diversification and foreign exchange risk hedging have also contributed to better economic growth.

An uptrend in oil and other commodity prices amid higher pay checks will push up consumer prices this year. The fact that the economy is getting closer to its full potential will see producers increasing prices with less fear of shrinking sales.

The central bank expects a US$5 rise in the oil price to $91 a barrel in the near term, hitting $95 by year-end.

``The healthier demand will allow producers to raise prices finally. They cannot remain in place much longer,'' said Mr Paiboon.

In its latest Inflation Report, the central bank maintains this year's economic growth forecast at 3-5 percent but indicates a greater probability for the upper end of that range than in the previous forecast. Growth in 2012 should be on par with this year.