Thailand’s economy may expand more than the government currently forecasts as tourism recovers from the nation’s worst political violence in almost two decades, according to Finance Minister Korn Chatikavanij.
“Room is on the upside,” Korn said in a Bloomberg Television interview from Bangkok today when asked if he expects to raise the country’s growth forecast further. “The potential driver for further upside would be tourism. We have seen some positive signs of that.”
The Finance Ministry raised its 2010 growth forecast to as much as 6 percent yesterday, as surging exports limit the impact from anti-government protests in April and May, which left 89 people dead and damaged buildings including the nation’s biggest shopping mall owned by Central Pattana Pcl. The central bank may raise its benchmark interest rate in the fourth quarter as the economy recovers, the ministry said.
Thailand’s “recovery continues to outperform even our expectations,” Ramya Suryanarayanan, an economist at DBS Group Holdings Ltd., said in a note today. “The central bank would have to remove monetary policy accommodation and return rates to neutral by early or mid-2011 to keep core inflation under check.”
Tourist arrivals at the nation’s international airport are “strong” and advanced bookings for July and August at Thai Airways International Pcl, the country’s largest carrier, are better than last year, Korn said.
The government’s revised 2010 growth forecast is “quite conservative,” and assumes that the economy will contract by 3.5 percent this quarter from the previous three months, Korn said. The economy may be unchanged in the July-to-September period from the current three months, he said.
The manufacturing industry wasn’t “really affected” by the recent political chaos as the unrest took place mostly in Bangkok, Korn said. The Bank of Thailand will release the monthly production data later today.
Thailand’s exports, equivalent to about 60 percent of the $272 billion economy, jumped 42.1 percent in May, the biggest gain in almost two years.
The baht’s appreciation hasn’t affected exports, indicating that the country “is no longer an exporting economy that depends entirely on price competition,” Korn said. “The Bank of Thailand is keeping its eyes on that,” he said.
The central bank said this month the impact of the unrest was limited and the economic momentum should continue. Policy makers on June 2 kept the main interest rate at 1.25 percent, the lowest level since July 2004. The next monetary policy meeting is on July 14.
Korn said he is reviewing the four “top-class” candidates to replace central bank Governor Tarisa Watanagase, whose term will expire at the end of September. The decision will be made “in the next couple of weeks,” he said.
“Any one of them would make an excellent governor,” Korn said. “They are all equally well-qualified. Unfortunately, we can have only one governor, not four.”
Korn confirmed earlier this month that Thirachai Phuvanatnaranubala, head of the Securities & Exchange Commission, former Deputy Finance Minister Pisit Leeahtam, Prasarn Trairatvorakul, President of Kasikornbank Pcl, and Deputy Governor Bandid Nijathaworn are applying to become the 22nd governor.