BANGKOK, April 12 (Reuters) - Thailand's central bank raised its 2013 economic growth forecast to 5.1 percent from 4.9 percent on Friday despite trimming its export projection, and it said inflation would be lower than it had expected, with the core rate well within its target range.
The BOT now forecasts exports will grow 7.5 percent this year, rather than the 9 percent projected in January.
The adjusted projections suggest interest rates could remain unchanged for some time. The Bank of Thailand's benchmark rate has been at 2.75 percent since October and most economists think it will remain there for some months yet.
The central bank cut its headline inflation forecast to 2.7 percent from 2.8 percent for this year and now expects a core rate of 1.6 percent rather than 1.7 percent, but some economists think inflation could go higher due to strong domestic demand and a tight labour market.
- - - - -
- 2013 core inflation seen at 1.6 percent (vs 1.7 percent seen in Jan)
- 2013 headline inflation seen at 2.7 pct (vs 2.8 pct seen in Jan)
- 2013 export growth seen at 7.5 pct (vs 9.0 pct seen in Jan)
- 2014 GDP growth seen at 5.0 percent (vs 4.8 percent seen in Jan)
- The BOT aims to keep core inflation - which excludes fresh food and energy prices - in a range of 0.5-3.0 percent and sets policy to achieve that.
- For a table on the forecasts
- - - -
BANK OF THAILAND STATEMENT
'Thailand's growth is projected to continue on the back of domestic demand, which remains the key growth engine over the horizon. Consumption spending in 2013 is poised to grow at a rate higher than previously projected, partly from spending on durable goods that surged in 2012 Q4.
'Continued support from favorable household income and employment prospects, fiscal measures and accommodative monetary conditions will help sustain consumption momentum in the period ahead.
'Private investment, although somewhat moderate in the near term, will remain on an upward trend. This owes primarily to businesses' capacity expansion to accommodate growing domestic demand, adjustments toward greater capital intensity in light of laboUr shortage, and the crowding-in effect of government's planned investment in big infrastructure projects.
'Meanwhile, export recovery will continue to be gradual. Merchandise exports might turn out weaker than expected in 2013 Q1, but should improve in the second half in line with recovery in trading partners' economies and leading indicators of exports.
'The global economy has improved in terms of stability, but remains fragile and continues to be the major source of risks for Thailand's growth.
'Some moderation in trading partners' growth is expected in early 2013, given weakness in the euro area and fiscal sequestration in the U.S. But going forward, recovery should gather pace with support from Japan's unprecedented stimulus policies, recovery of private spending in the U.S., and continued strength in Asia.
'The MPC views that political uncertainty in Italy and financial sector problems in Cyprus might add to uncertainty but only in the near term.
'Inflation remains stable. Soft outturns in 2013 Q1, especially food prices, suggest that near-term pressure is rather muted. Over the period ahead, however, demand pressure may gradually increase with projected economic growth and the output gap that will turn slightly positive further out in the horizon. Cost pressure could edge up slightly compared with the previous assessment, given A slightly higher projected global crude oil price in 2013 due to greater geopolitical risks and better prospects of global crude demand.
'However, with regard to domestic energy prices, the MPC continues to assume the exemption of diesel excise taxes throughout the forecast period.
'Amidst current economic expansion, incipient signs of financial imbalances are also present. Rising household debt might add more fragility to the household sector going forward, while risk taking in the stock and real-estate markets has also increased. These developments continue to warrant close monitoring.
- - - -
SANTITARN SATHIRATHAI, ECONOMIST, CREDIT SUISSE
'The message here is that they seem to be more optimistic on growth but not exports. More of the GDP's upper revision will come from domestic demand rather than exports, which we agree with.
'... It will be very easy for growth to exceed the 5.1 percent forecast the Bank of Thailand put out. They're definitely not worrying about growth and may be increasing forecasts gradually.
'... I think on inflation the two things keeping them comfortable are food prices easing a bit and the strengthening of the baht. These have probably capped any inflation fears.
'... There are pockets of the economy that are showing signs of overheating a bit, particularly consumer credit and asset prices. We can see the Bank of Thailand possibly taking macro-prudential measures on second properties to curb credit growth. The latest statement accompanying the forecast is they may do something if household debt and asset prices continue to rise.
'It's a good sign to see the bank moving away from a sole focus on inflation to look at other things as well. This is very important.'
- - - -
THAMMARAT KITTISIRIPAT, SPECIALIST, TMB ANALYTICS
'The BOT seems positive on the domestic outlook, mainly due to the government stimulus plan, the infrastructure plan, and our trading partners' economies - Japan and ASEAN.
'Key risks now should be higher volatility of capital flows, causing a rapid baht strengthening, and a high level of consumer debt.
'With the domestic economy on track, inflationary pressure remains at a low level and is still in the middle of the BOT's inflation target. That is why we expect the benchmark rate to be at the current level for the rest of the year.'
- - - -
TANAWAT RUENBANTERNG, ECONOMIST, TISCO SECURITIES:
'The increase in the BOT's GDP growth projection reflects a vibrant Thai economy. Even though the inflation outlook remains largely unchanged, we forecast that inflationary pressure will start to accelerate in the second half of the year, mostly due to strong domestic demand. In general, the data reflects that the BOT sees a brighter economic outlook.
'We think the BOT should start normalising its monetary policy in the second half of the year, maybe in the last quarter, because domestic demand is very strong and this should push inflation higher in the second half of the year.
'In terms of risks, the BOT still sees that domestic demand will be the main growth driver, particularly from private investment, and the very low unemployment rate in Thailand will pose some risks to inflation because if they want to start a project they have to raise capital and hire workers and the pool of available workers is quite small.'
- - - -
- The baht was at 29.03 per dollar before the data came out; afterwards it was around 29.00/04.
- The benchmark stock market index was up 0.35 percent after the data; at the midsession break it had been up 0.53 percent.
- - - - -
- For details, see Bank of Thailand website at: http://www.bot.or.th/English/MonetaryPolicy/Inflation/Pages/index.aspx
- To track Thai economic data
- Thailand's economy, Southeast Asia's second biggest after Indonesia, grew a much higher-than-expected 3.6 percent in October-December 2012 from the previous three months thanks to strong domestic demand. It surged 18.9 percent from the same period in 2011, when floods caused huge damage.
- The economy expanded by
Copyright Thomson Reuters 2013. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.