August 25, 2008
BANGKOK (AFP) - Thai economic growth dropped to 5.3 percent in the second quarter of 2008, official figures showed Monday, as political uncertainty, soaring inflation and weak domestic demand hit the kingdom.
The National Economic and Social Development Board said gross domestic product (GDP) growth at an annual rate was down from a revised 6.1 percent in the first quarter of the year.
The board's secretary general Amphon Kittiamphon said the decline was due to lower government spending and a slowdown in private sector investment.
Despite that, the board forecast the Thai economy would likely grow between 5.2 and 5.7 percent this year, up from its May projection of 4.5 and 5.5 percent.
"If the government pushes forward with its mega projects including infrastructure construction, as well as creating confidence among investors, our GDP in the last six months of this year is most likely to be no less than 5.2 percent," Amphon told reporters.
Volatile global oil prices have already prompted Thailand's central bank to lower its growth estimates for this year to 4.8-5.8 percent. The finance ministry had initially projected 6.0 percent.
Inflation soared to a 10-year-high of 9.2 percent in July due to high fuel and food prices. The Bank of Thailand has estimated that inflation will average 7.5 to 8.8 percent this year.
Analysts said the second quarter slowdown likely indicated the Bank of Thailand will hike interest rates only once more this year from the current level of 3.5 percent. Its rate-setting committee is due to meet on Wednesday.
"(These economic conditions) will limit central bank tightening," Standard Chartered economist Usara Wilaipich told Dow Jones Newswires.
"Therefore, we expect only one more 25-basis-point hike from the Bank of Thailand and this should be the last rate hike for the rest of this year."
Thailand's government, which was formed in February, has been hit by street protests since May demanding the resignation of premier Samak Sundaravej.
