GROWTH MAY REACH 5% IN 2010

       The Monetary Policy Committee (MPC) is optimistic the economy will post an impressive recovery to record growth of 4.5-5 per cent next year, bringing nominal gross domestic product back to the pre-2008 crisis level.
       The committee yesterday kept the policy interest rate unchanged at 1.25 per cent, heaving a big sigh of relief that risks to the global and domestic economies have declined.
       The global recovery, however, is uncertain, while the domestic political conflict remains a risk.
       Inflationary pressure has been low even though oil prices have continued to rise recently. However, high oil prices could become a threat to economic recovery.
       "I think we'll be able to step out of the crisis, which will return GDP in next year's fourth quarter to the same level as in last year's first quarter. It means the country's income will have lost opportunities for three years," said Chakramon Phasukvanich, a member of the MPC.
       He said the economy would possibly pick up at the end of this year, with a contraction of 3.5 per cent for the entire year, and then expand by 4.5-5 per cent next year.
       The Bank of Thailand had previously projected the economy would post positive growth of 3-5 per cent next year, driven by government spending and exports.
       Chakramon said Map Ta Put investment projects worth more than Bt200 billion and the government's stimulus package would significantly drive the economy.
       The recovery in many export sectors, rising employment, improved business and consumer confidence and retail sales have also pointed to a V-shaped recovery, he said.
       Paiboon Kittisrikangwan, Bank of Thailand assistant governor, said the central bank would not formally revise the economic-growth projection until October.
       Despite higher-than-expected growth in the second quarter, the bank's latest projection for an economic contraction of 3-4.5 per cent this year therefore remains in place.
       The sustainability of the global economic recovery, which relies on the G-3 (the US, Japan and the euro zone) economies, has been in doubt. The financial problems of the US housing sector have continued, which means there has not been a recovery in consumer spending.
       In addition, the problems faced by US and Europe financial institutions have not yet been resolved. They could even worsen, said Paiboon, eroding the sustainability of a global recovery.
       "There is concern that US consumption, which has driven the global economy, will not be able to pick up on a continuous basis," said the assistant governor.
       Chakramon said if the US financial institutions were to function by giving loans to the real sector, the US economy would be back on track.
       He said the global recovery currently was at least L-shaped but would not necessarily end up as U- or V-shaped.
       The MPC hopes the government's budget disbursement will be on target in a bid to boost the economy, with private investment possibly returning from the middle of next year.
       If not, the economy could be in trouble, Chakramon said, adding that political uncertainty continued to be a risk.
       Paiboon said the central bank was not yet prepared to say the policy interest rate had reached its lowest level. He said the bank remained ready to tackle any internal and external risk factors.