Monday, June 4, 2007

Thailand Economy Brightens With Constitution Tribunal Ruling

Another positive sounding report from Bernama News Agency after the recent crisis. It is worth to note that the Thai stock market has been hitting record levels 2 days in a row after the verdict. Investors know something the general public doesn't? Good times for the economy (and property market) may be back, sooner than you think! Read on...

Excerpt from Bernama

The Thai economy looks brighter after the Constitutional Tribunal's decision last week to dissolve four political parties, according to the Kasikorn Research Center.

TNA quoted the leading think tank as saying that the tribunal's ruling regarding party dissolutions on May 30 made Thailand's situation at this political juncture become much clearer, although it has yet to be seen how the referendum on the charter draft will affect the overall climate and whether the general election would be held at year-end as scheduled.

The tribunal's decision is considered a very positive factor for private investor confidence and the economic outlook.

KRC projected the economy would clearly recover at the beginning of the third quarter of this year because the private-sector confidence is set to improve, the acceleration of budget disbursements -- particularly in the last quarter of the 2007 fiscal year, interest rate reduction, and state measures to stimulate growth in the property sector.

Kasikorn views these factors as contributing to an economic expansion of around 4-5 per cent in the second half of this year compared with 3-3.5 per cent in the first six months.

However, future political development needs to be monitored because it could have an impact on confidence in the business and household consumer sectors, particularly if a demonstration takes place and turns violent following the tribunal's verdict.

KRC said that the inflation rate is likely to edge up in the second half of this year due to higher oil prices.

It projected that the general inflation rate will stay at an average of 2.2-2.5 percent in the second half of the year compared with 2.1-2.2 percent in the first half.

Exports in the first quarter of this year grew 18.5 percent, higher than earlier expected. However, exports are expected to grow more slowly in the second half of the year at 8-10 percent compared with a 15-17 percent growth performance in the first half.

The decline in exports stems from the US economic slowdown and the strengthening of the baht.

KRC also forecast the Bank of Thailand would consider decreasing the policy interest rate further to 3-3.25 percent of by the end of this year.


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