Thailand: Exports may push GDP up by 7.5%

[leadpencil]

Below is an article from todays Bangkok Post.

 

The findings and predictions of the Fiscal Policy Office (FPO) are concerning as they are showing that the appreciation of the baht has had no negative consequences on the economy. The FPO recommends that the Government does not intervene in the currency markets and instead should take advantage of the relatively lower cost of imported goods.

 

 

 

Thailand: Exports may push GDP up by 7.5%

 

Economic growth is projected to reach 7.5% for 2010, thanks to strong export growth, the Fiscal Policy Office announced yesterday.

 

Third-quarter economic growth is projected to slow to 6% year-on-year and fall to 3.3% in the fourth quarter, after posting 10.6% growth in the first half of the year compared with last year. Growth in 2011 is projected at 4.5%.

 

The new forecast, as much as two percentage points higher than estimates made earlier this year, shows that the recent appreciation of the Thai baht has had little adverse impact on the overall economic recovery.

 

Satit Rungkasiri, director-general of the Fiscal Policy Office, said exports had been the main growth engine this year, accounting for as much as 60% of overall gross domestic product.

 

The FPO estimates that exports of goods and services will rise 13.9% this year compared with last year, up 11.9% from its previous forecast.

 

Export growth has been driven by shipments to China, Asia and other developing markets as trade to traditional markets of the United States, Europe and Japan has been mostly flat due to their sluggish economies.

 

But many exporters and business leaders have been increasingly worried that the appreciation of the baht will hurt export competitiveness going forward. The baht, which traded yesterday at 30.69/74 to the US dollar, has gained over 8% for the year to date thanks to a steady trade surplus and capital inflows.

 

The FPO estimates that every 1% appreciation in the baht against the greenback will negatively affect export volumes by 0.4 percentage points and GDP growth by 0.3 percentage points.

 

But the analysis is based on certain static assumptions, such as that the baht's movement occurs even as other variables are unchanged. In the case of currencies, nearly all Asian currencies have gained ground against the US dollar. Capital inflows have increased into the region as investors look to take advantage of higher growth rates than in the West.

 

The FPO says the baht appreciation is unlikely to have a drastic impact on growth and exports because global demand for Thai products has increased and currencies of key trading partners have also appreciated.

 

Mr Satit said he believed that the Bank of Thailand should not look to intervene in the currency markets to reverse the trend of baht appreciation, considering the size of financial flows in the global markets.

 

"Instead, what the government should do is take advantage of the [appreciating baht] and speed up investment in public infrastructure projects, such as the high-speed train programme, to take advantage of lower [import] costs," he said.

 

The FPO estimates the baht will average 31.70 to the dollar this year and 30 to 31 in 2011, though it could reach 29.

 

Other key estimates by the FPO include average economic growth of 4.3% this year for Thailand's 14 key trading partners and that domestic investment will keep improving, steadying unemployment at 0.9% this year, a 10-year low.

 

The FPO said 2010 growth figures would be distorted by low base effects, as the economy shrank 2.2% in 2009 due to the global economic downturn.

 

Source: bangkokpost.com

 

 

Publication date: 9/28/2010

[scaffman]

well thats not good news was hopeing they might devalue the baht after japan devalued there

currency. as i can not see the pound getting any better.but will still be back in ten weeks what ever happens