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Thai MOF Revises Up 2012 GDP Growth Forecast To 5.5%

03/26/2012 | 04:57am US/Eastern

-- Thailand's Ministry of Finance raises its 2012 economic growth forecast to 5.5% from 5.0% previously

-- The ministry assumes the benchmark policy interest rate will be at 3.25% vs 3.00% now

(Adds trade, current account forecast in 3th-4th paragraphs, inflation forecast in 5th paragraph, policy rate and baht assumption in 6th-7th paragraphs.)

By Phisanu Phromchanya

Of

Thailand's Ministry of Finance has revised up its 2012 economic growth forecast to 5.5% from 5.0% previously, due mainly to recovering domestic demand and the government's fiscal stimulus measures, the head of the ministry's Fiscal Policy Office said Monday.

Severe flooding in the fourth quarter slashed the country's gross domestic product growth by 3.7 percentage points last year, bringing economic growth rate for the full year to just 0.1%.

While the situation will improve this year, slowing growth in China and lingering sovereign debt problems in the euro zone will likely hurt exports, and demand for machinery parts to rebuild plants damaged by the floods will boost imports, FPO head Somchai Sujjapongse told reporters.

Imports will likely grow faster than exports this year, trimming the country's trade surplus to $7.3 billion from $23.5 billion last year, the ministry's think tank said, adding the current account will likely swing to a deficit of $3.5 billion from a surplus of $11.9 billion in 2011.

Headline inflation will likely edge down to 3.6% from 3.7% in 2011 while core inflation is projected at 2.3%, compared with 2.0%.

In preparing its forecast, the FPO assumed the benchmark policy interest rate will be at 3.25% at the end of the year, implying that it expects a 25-basis-point hike in the one-day repo rate from the current policy rate of 3.00%.

The FPO also assumes the average exchange rate of baht to be at THB31 per dollar in 2012, compared with THB30.5 per dollar in 2011, said Somchai.

-By Phisanu Phromchanya, Dow Jones Newswires; 662-690-4200; phisanu.phromchanya@dowjones.com

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