Economic growth could reach 6% this year if the government and state enterprises meet their spending targets, according to Dr. Atchana Waiquamdee, a deputy governor of the Bank of Thailand.

She said the government would have to disburse at least 94% of its expenditure budget and state enterprises 80% of their investment budgets if growth were to meet current government targets.

The Bank of Thailand currently projects economic growth this year at 4.8% to 6%, Dr Atchana said yesterday at an economics conference organised by Bangkok Bank.

But current growth projections are based on Dubai oil prices averaging $98 per barrel as a base case or $113 per barrel in the worst case. With oil prices now nearly $140 per barrel, many economists expect the central bank to revise its growth target down next month, particularly given rising inflation and weak consumer and investor sentiment.

Dr Atchana acknowledged that oil prices and inflation had increased more than expected, and added that the central bank's priority was price stability rather than GDP growth.

Inflation in May rose to a 10-year high at 7.6%, with core inflation, which excludes food and energy prices, up 2.8%.

The central bank's Monetary Policy Committee is widely expected to raise its benchmark one-day repurchase rate when it meets on July 16 in light of rising inflation.

''The central bank will set the policy rate to suit the country's economic environment. Despite an economic slowdown, the BoT won't use strong medicine. We would apply [rates] gradually to maintain sustainable growth,'' Dr Atchana said.

She said private consumption had not yet been significantly affected by rising costs. But private investment had been affected due to political instability, while rising fuel costs had affected business operating expenses.

Bangkok Post, 21.06.2008

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