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Oil prices, political troubles are to blame
WICHIT CHANTANUSORNSIRI
Economic growth could fall below 6% this year due to soaring oil prices and political uncertainties, Finance Minister Surapong Suebwonglee said yesterday.
''At the beginning of the month, we still viewed the situation optimistically, that our stimulus measures would be sufficient to manage the situation,'' he said. ''But today, we see things different than we had forecast, both in terms of oil prices moving rapidly upward and in terms of politics.''
Of the two, political uncertainty is the greater factor. Dr Surapong laid the blame for the slowing economy on the anti-government protests of the People's Alliance for Democracy.
''If [the PAD] continues to threaten that it will do this or that, then clearly it creates a problem [for the economy],'' he said.
Since the PAD announced its campaign late last month to force Prime Minister Samak Sundaravej from office, the SET has fallen by nearly 120 points, erasing almost one trillion baht in value from the market.
While last Friday's PAD rally at Government House passed largely without incident, the government is facing an increasing crisis of confidence as public support and investor confidence have continued to deteriorate.
Tourist operators have also begun to see a decline in business due to the prospect of the protests turning violent, or even leading to military intervention to break the ongoing political standoff.
Oil prices, meanwhile, rose by more than 1% to more than $136 per barrel, despite pledges by Saudi Arabia on Sunday to increase production to ease market constraints.
Authorities had earlier set an economic growth target of at least 6% for 2008, up from 5% last year. Since the beginning of the year, the government has approved a range of tax incentives to increase household disposable income, help small businesses and listed companies and spur transactions in the property market.
But with oil prices sharply above earlier estimates and political risk affecting investment and spending, it seems certain that growth would continue to slow from the 6% rate posted for the first quarter.
The Bank of Thailand, in its April Inflation Report, announced a growth forecast of 4.8% to 6% for 2008. Growth forecasts was raised slightly from its January estimates after factoring in the impact of government stimulus measures announced in the first quarter and expectations that export growth would remain robust this year.
But the forecasts had set a base-case assumption for Dubai crude oil at $93 per barrel, well below market prices of $130 per barrel.
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