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The Finance Ministry expects the Thai economy to expand 5.7 per cent this year, despite some risk factors that include the euro zone crisis which is plunging demand for Thailand's exports.

Thai economy expected to expand despite euro zone crisis

The Finance Ministry expects the Thai economy to expand 5.7 per cent this year, despite some risk factors, which include the euro zone crisis that is pushing down demand for Thailand’s exports.

Somchai Sajjapongse, director general of the Fiscal Policy Office, said at a press conference today that the Bt350 billion public investment on water management infrastructure would be key to buoying the economy, aside from the recovery in the manufacturing sector.

While the National Economic and Social Development Board forecasts a growth range of 5.56.5 per cent, the office expects the economy to grow in the range of 5.26.2 per cent, an upward revision from the previous forecast announced in March.

Somchai said that domestic consumption should show a vigorous and continued recovery, as consumers and investors have been cheered by the fast recovery in the manufacturing sector after last year's floods.

The floods also sparked a need for replacement and repairs. Spending is being boosted by the higher minimum wage and the pay rise for civil servants. This is supported by the government's rice pledging, firsthome and firstcar schemes, and corporate tax cut policy.

The government is expected to start spending the Bt350 billion fund in the second half of this year.

Still, he remarked that the export sector and tourism sector should witness a slowdown, given the Euro zone debt crisis.

While the export value is likely expand only 12.8 per cent (against Commerce Ministry's 15 per cent forecast), the import value is expected to increase by 22.3 per cent this year.

On lower export income and higher imports driven by domestic demand, Thailand should this year register a current account deficit, estimated to account for 0.10.9 per cent of gross domestic product.

The office expects inflation to stay at 3.5 per cent this year, in line with weakening oil prices.