Economic Outlook 2008

(I) Economic performance 2007

          The Thai economy in the third quarter of 2007 expanded by 4.9 percent, picking up from 4.3 and 4.2 percent in the second and first quarters. This was driven mainly by private consumption and investment recovery as well as an acceleration of budget disbursement. A vigorous export growth also supported the growth momentum. Overall, GDP in the first three quarters grew by 4.5 percent.

          Thai economy in the third quarter remains stable with inflation at 1.6 percent, subsided from 2.4 and 1.9 percent recorded in the first and second quarters. Average headline inflation during the first 10 moths of 2007 was 2 percent. Unemployment rate stood at 1.2 percent while current account balance registered a surplus of 2.93 billion USD in the third quarter or 9.26 billion USD in the first 9 months.

          Interest rate continued its downward trend. Credits accelerated while deposits slowed down slightly. However, liquidity remained at a high level. Movement in currency and stock markets became more volatile, caused by fluctuation in global financial market. On average, Thai baht appreciated, and SET index increased.

          Export in the third quarter increased by 12.6 percent, softened from 18.9 percent in the first half of 2007. Export slowed down both in agriculture and manufacturing products. On the other hand, import continued to grow, expanding by 8.4 percent.

          Trade balance was in a surplus of 2,942 million USD in the third quarter or a surplus of 8,023 million USD for the first nine months of 2007. Current account registered a surplus of 2,928 million USD in the third quarter or 9,262 million USD during the first nine months.

          In 2007, the Thai economy is likely to grow by at least 4.5 percent. Export will most likely be the main driving force although a slowdown is foreseen in the latter half due to prevailing global economic slowdown, however, private consumption and investment will recover throughout the same period. Inflation rate will be 2.3 percent. Current account will record a surplus of 6.0 percent of GDP and unemployment rate will remain low at 1.5 percent.

                                                               (II) Economic Outlook 2008

          In 2008, the Thai economy is forecast to expand by 4.0-5.0 percent. The recovery in domestic demand is expected to offset a slowdown in export. Domestic conditions will be more favorable with such supporting factors as lower interest rate and unemployment rate, implementation of budget deficit policy in the fiscal year 2008 and a better political certainty. However, downside risks are rising coupled with volatile oil prices and world economic slowdown. Inflation rate is projected at 3.0-3.5 percent.

Source: Division of Economic Information

Department of International Economic Affairs

January 2008