THAILAND

Even though inflation should remain within targets for the near future, policymakers must remain vigilant against imbalances within the overall economy, according to Bandid Nijathaworn, a deputy governor of the Bank of Thailand.

Rising property prices and household debt were two examples of potential imbalances, he said. "The lesson from the 1997 crisis was clearly that if economic imbalances are allowed to continue unchecked, it will create problems."

Dr Bandid, speaking yesterday evening on monetary policy trends at the Stock Exchange of Thailand, said the central bank saw economic growth momentum continuing through the second half of the year, albeit at a slower pace than in the first half.

The economic recovery in the US, Europe and Japan remains weak, potentially affecting Thai exports and global growth overall.

But Asian economies, including Thailand, will clearly outperform other regions in terms of growth over the next few quarters, a fact that will likely result in continued fund inflows to the region's markets.

Dr Bandid said four key sectors would help sustain growth in the second half of the year - tourism, exports, fiscal policy and private investment.

"If we look at exports, we still see expansion in the second half of the year, although at a slower pace than in the first half," he said.

Exports jumped by 41.8% in US dollar terms in the second quarter from the year before, up from a 32% rise in the first quarter. The National Economic and Social Development Board projects exports this year rising 25.7% from last year to $189.7 billion.

The NESDB said on Monday that the economy grew 9.1% in the second quarter from the year before. First-half growth was 10.6% year-on-year, and a rise of 7% to 7.5% is forecast for the full year.

Stronger growth and concerns about a pickup in inflation led the central bank's Monetary Policy Committee on Wednesday to lift its one-day policy rate by a quarter percentage point to 1.75%, the second increase in six weeks.

Dr Bandid said inflation was expected to rise in 2011, and that monetary policy needed to be "normalised" to maintain price stability.

"The key factors [for the MPC] will be risk from the global economy and the need to maintain domestic price stability," he said.

The MPC, which bases policy on a goal to maintain core inflation within the range of 0.5% to 3%, has two more meetings scheduled this year, with the next one on Oct 20.

Core inflation, which excludes food and energy prices, rose 1.2% in July, with headline inflation up 3.4%.