Thailand's central bank expects current account deficit until 2008

High oil prices, imports of capital goods and new multi-billion dollar infrastructure projects are set to keep Thailand's current account in the red for the next three years, the central bank said on Saturday.
"We will certainly see deficit in the next three years, but the level won't be so critical," Bank of Thailand Governor Pridiyathorn Devakula told a financial seminar, referring to the country's current account balance.
Pridiyathorn did not forecast the deficit for 2006-2008 but said he expected a shortfall of $3-$4 billion in 2005, equivalent to less than two percent of gross domestic product (GDP). Thailand is set to report this year its first annual current account deficit since 1998.
Pridiyathorn said the current account surplus in 2004 was $6.6 billion, but previous preliminary data from the central bank showed the surplus was $7.29 billion.
He said 2006 would be another "sweet year" for the Thai economy, which was expected to grow more than 5 percent.
The central bank had estimated the economy would grow between 4.25 percent and 4.75 percent in 2005.
Robust exports, especially from the automotive, paper and electronics sectors, would continue to be the main driver of GDP growth next year while the tourism industry had recovered from the effects of the tsunami last year, he said.
But robust export growth also meant higher imports of capital goods and a rise in capacity utilisation, now standing at between 80 and 90 percent, Pridiyathorn said.
Imports of machinery and the government's plan to spend 1.7 trillion baht ($41.3 billion) on mega projects designed to boost growth over the next five years would hurt the current account balance, he said.
Pridiyathorn expected annual consumer inflation in December to rise by more than 6 percent and remain in the six percent range in the first quarter of next year due to current high oil prices, compared with 5.9 percent in November.
He said the central bank's hawkish stance in fighting inflation by raising interest rate would deter capital outflows and encourage domestic household savings.
The Bank of Thailand has raised interest rates by 275 basis points since August of last year and suggested more rate rises were on the cards due to lingering inflation and resilient growth.