By Orathai Sriring and Kitiphong Thaichareon
BANGKOK, April 12 (Reuters) - Thailand's central bank raised its 2013 economic growth forecast to 5.1 percent from 4.9 percent but trimmed its inflation projection and its export estimate, which suggests that interest rates could stay low for now as global demand remains weak.
The Bank of Thailand (BOT) on Friday shaved its 2013 headline inflation projection to 2.7 percent, from 2.8 percent earlier, and that for core inflation, which guides monetary policy, to 1.6 percent from 1.7 percent.
The revisions for growth of gross domestic product (GDP) reflect continued strong domestic demand as well as higher public and private investment and consumption, BOT Assistant Governor Paiboon Kittisrikangwan told a briefing. Domestic demand 'remains the key growth engine over the horizon,' the central bank said.
But the global economy 'remains fragile' and export recovery 'will continue to be gradual,' the central bank said, noting that exports 'might turn out weaker than expected' in the first quarter but should improve in the second half. Exports, which equal more than 60 percent of Thailand's GDP, rose just 3.2 percent in 2012.
The BOT on Friday also raised its GDP growth forecast for 2014 to 5.0 percent from 4.8 percent.
In 2012, the economy expanded 6.4 percent, after growth of just 0.1 percent in 2011 due to bad floods in the final months.
The central bank increased the 2013 GDP forecast one day after Indonesia's central bank trimmed its growth projection to 6.2-6.6 percent growth from the prior 6.3-6.8 percent.
The Thai central bank predicted private consumption would rise 4.7 percent this year, compared with 4.3 percent seen in January, and public investment would increase 22.3 percent year-on-year, against 17.1 percent seen earlier.
The BOT forecast private investment would rise 7.4 percent this year, down from 12.1 percent seen earlier, but it said although that was somewhat moderated , it would remain on an upward trend.
ECONOMY IS 'VIBRANT'
Tanawat Ruenbanterng, economist at Tisco Securities, said the BOT revisions reflect that the Thai economy is 'vibrant'. But he said inflationary pressures will accelerate in the second half and the BOT should start 'normalising' monetary policy by the fourth quarter.
After an surprise cut in October, the BOT's policy committee has left the benchmark interest rate unchanged at 2.75 percent. It has resisted calls by Finance Minister Kittirat Na Ranong for a rate cut to deter 'hot money' inflows that pushed the baht to 16-year highs.
But Kittirat wants rates lower in order to help exporters, who he says are being hurt by a strong baht. Due to steady fund inflows, the baht has risen about 5.5 percent against the dollar this year, making it Asia's strongest currency. This week, the baht has risen nearly 0.9 percent.
The central bank, which says the current policy rate is appropriate, has expressed concern that fast credit growth, high household debt and rising property prices could increase inflationary pressures. The next rate review is on May 29.
BOT Governor Prasarn Trairatvorakul said on Tuesday the baht's appreciation has been too. However, he said the central bank has tools ready to use but there was no need for that yet.
MONITORING ASSET PRICES
Paiboon said rapid credit growth, if continued for a long time, could lead to asset bubbles and 'if asset prices and household debt are going higher and affect long-term stability, the authorities will need to have measures to tackle them.'
The central bank has said that the impact of a big minimum wage rise in January has been limited. It aims to keep core inflation, which strips out fresh food and energy prices, between 0.5-3.0 percent.
A daily minimum wage of 300 baht ($10) rolled out on Jan. 1 across the country, an average rise of 25.5 percent, and came on top of a nationwide increase of 40 percent last April.
Inflation has been curbed due in part to government price controls and subsidies to ease living costs.
The BOT's GDP growth estimate compares with 4.5-5.5 percent by the National Economic and Social Development Board, which compiles GDP data. The agency will release new forecasts and first-quarter GDP data on May 20.
The Asian Development Bank projects 2013 growth of 4.9 percent for Thailand, Southeast Asia's second-largest economy.
(Additional reporting by Amy Sawitta Lefevre, Paul Casten and Pairat Temphairojana; Editing by Richard Borsuk) Keywords: THAILAND ECONOMY/GDP
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