Thai economy set to grow at 5.6 per cent: Finance Ministry

Bangkok, June 26 (TNA) - The Thai economy is on path to expand by 5.6 per cent, and indications are that key interest rates might be adjusted upwards to battle spiralling inflation, according to the Fiscal Policy Office (FPO).

Fiscal Policy Office Director Pannee Satawarodom said strong fundamentals
are still cushioning the Thai economy from external risks, and the Office
is standing by the earlier forecast growth rate at 5.6 per cent, similar
to the forecast issued in March.

The Thai economy is expected to fare better than the 4.8 per cent growth
recorded for 2007 on the back of robust 6 per cent growth during the first
quarter this year, thanks to exports to new markets in Asia and the Middle
East.

At this rate, exports are projected to expand by 8 per cent this year,
compared to 7 per cent in 2007. Imports meanwhile are expected to rise in
line with the recovery of domestic activities to nearly 10 per cent this
year compared to 3.5 per cent in the previous year.

Despite the threat of rising inflation and interest rates, domestic
investment and consumption remain active. Domestic consumption is
projected to expand by 3.5 per cent this year and investment by 8.5 per
cent, according to the Fiscal Policy Office.

Mrs. Pannee noted that the anti-government protest which began in May has
somewhat dampened investor and consumer sentiment, as many have put
activities on hold while they are waiting for stability.

Rising inflation meanwhile poses one major risk factor, said Mrs. Pannee,
as headline inflation is forecast at 7.2 per cent this year and could peak
at ten in the face of skyrocketing fuel prices.

With inflation rises looming and given the global rates trend, it is
likely that the Bank of Thailand may raise benchmark rates from the
current 3.25 per cent to 4.25 by end of this year, she added. (TNA)