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BoT: Flooding has slowed growth

Posted by arnon_k On November - 23 - 2011

Economic growth is likely to be significantly lower this year than even the earlier projection of 2.6 per cent, because of the catastrophic flooding, Bank of Thailand governor Prasarn Trairatvorakul said on Wednesday.

But, on the good side, rehabilitation expenditure by both the public and private sector after the water recedes could stimulate the economy in 2012 to expand by more than the forecast 4.1%, the central bank governor said.

The flood should have only a short-term impact on the economy, but its effects would be severe in the October to December quarter this year.

Gloomy external factors could be the biggest threat to the economy next year, he said.

”The economic forecast for this year has been revised down significantly from the one we announced on Oct 19, but growth in the next year should be more than 4.1 per cent,” Mr Prasarn said.

The central bank’s Monetary Policy Committee would meet at the end of this month to decide whether to adjust the policy interest rate, which is currently 3.5 per cent, and announce a new economic growth forecast for this year and 2012.

”The inflation expectation has stabilised, and the price pressure on oil and other commodities should decline in line with weakening global demand,” Mr Prasarn said. ”The key issue now is how vigorous the rehabilitation after the flood will be.”

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