Overview - Thai Economic Performance in Q4/2007 and Outlook for 2008

The Thai economy in the fourth quarter expanded impressively by 5.7 percent, higher than 4.4 percent in the first three quarters. Growth components were more balanced than in first three quarters. Although, net export remained the key contributor, the government spending also increased rapidly and private investments picked up noticeably. For the year, the Thai economy registered a 4.8 percent, contributed primary by robust export growth while domestic demand remained soft.

Overall economic stability remained sound. However, inflationary pressures has risen towards the end of the year. Headline inflation was 2.9 percent in the fourth quarter, higher than 2.0 percent in the first three quarters. For the year 2007, headline inflation was 2.3 percent. Current account balance registered a surplus of 6.18 billion USD in the fourth quarter, and a surplus of 14.922 billion dollar, equivalent to 6.1 percent of GDP for the whole year. Unemployment rate was 1.4 percent.

Money market rate were put on hold, credits accelerated while deposits declined steadily. Liquidity has consequently declined but remained high. Thai baht appreciated against US dollar but real effective exchange rate depreciated. On average, SET index improved despite its short term volatility.

Budget balance and cash balance recorded deficits, under the stance of the expansionary fiscal policy to stimulate the economy. Public debts stood at 38.2 percent to GDP at the end of November 2007, decreased from 40.4 percent at the end of December 2006.

In 2007, favorable factors that supporting the Thai economy included robust economic growth of new export markets which benefited Thai export, acceleration of government and state-owned enterprise budget disbursement, declining interest rate, and improvement in business sentiment in the latter half of the year.

In 2008, the Thai economy looks set to expand by 4.5-5.5 percent, higher than the previous forecast of 4.0-5.0 percent. Upward revision of the forecast is due to faster recovery in private investment, than previously expected, and better-than-expected export performance. Robust export growth had continued throughout 2007, especially the exports of electronics, auto and parts, tapioca, rubber, and rice. Moreover, January 2008 continued to see an impressive growth of exports. The economic growth components in 2008 are expected to be more balanced, thanks to the recovery in domestic demand. This will be facilitated by low interest rates and unemployment rates, expansionary fiscal policy and government urgent policies to strengthening domestic economy, and the improvement in consumer and business confidences. However, pressures from oil prices will cause inflation to increase to an average of 3.2% - 3.7%. Downside risks associated with the 2008 outlook are rising of oil prices and global economic slowdown. Sound management under the new government to lessen the impacts on the Thai economy is the key.

Thailand's Key Economic Indicators

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