Thailand: Finance Ministry cuts GDP growth forecast.

(From Thai Press Reports)

Section: Economy - The Finance Ministry Tuesday cut its 2005 economic growth forecast by a half-point to 4.1% to 4.6% due to the impact of higher-than-expected global oil prices, the Bangkok Post reports.

Somchai Sujjapongse, deputy director-general of the Fiscal Policy Office, said the new forecast now projected an average Dubai oil price for the year of $48.30 a barrel, up from previous estimates of $42.50. Dubai oil prices in Singapore are currently trading at $58-59 per barrel.

Dr Somchai said the new Finance Ministry projections maintained estimates of 3.4% average economic growth for Thailand's 11 key trading partners.

For growth this year to exceed the 4.6% upper range, Thai exports would have to increase by more than 20% for the year, with imports limited to no more than 28.7% growth and the trade deficit under $9.5 billion, according to the Finance Ministry.

At the same time, the current account deficit would also have to be maintained under $3.9 billion, or 2.2% of gross domestic product, with inflation no higher than 4.5%. In a worst-case scenario, the ministry sees the current account posting a deficit of $4.9 billion, or 2.8% of GDP.

But with growth of just 3% in the first half, most economists doubt that activity will improve enough in the second half to boost total growth to near 4.5%, particularly as oil prices show little signs of easing significantly in the short term. The Thailand Development Research Institute currently projects 2005 growth at 4.2%, while Kasikorn Research Centre has an estimate of 3.6% to 4% and 3.4% by Phatra Securities.