Sunday, September 15, 2019

Politics hangs over growth view

Apr 24. 2019
Facebook Twitter


2,707 Viewed

DELAYS to the formation of a new government could hurt the economy amid a global slowdown, warns the World Bank, which is projecting 3.8 per cent expansion in the country’s economy this year – down from the 4.1 per cent posted for 2018.

The multilateral lender estimates growth will edge up to 3.9 per cent next year.

Thailand’s growth rate is expected to be lower than regional average as expansion in developing East Asia and the Pacific is projected to soften to 6 per cent in 2019 and 2020, down from 6.3 per cent in 2018, the World Bank said in a report. 

The world economy is expected to expand 2.7 and 2.8 per cent for this year and the next, respectively, decelerating from 3 per cent last year.

“Don’t pay much too much attention to Thailand’s slower growth compared with its peers in the Asia-Pacific region. The Thai economy has recovered over the past two years,” said Kiatipon Ariyapruchya, senior country economist for Thailand.

Still, the World Bank expressed concerns over the possibility of further delays in the formation of a new government after the inconclusive outcome of the general election in March, and these doubts might affect investment confidence.

The bank said that the near-term growth projections assume that the government will deliver on its planned public infrastructure projects, with the pace scheduled to accelerate in 2019 and pick up further in 2020 as those related to the Eastern Economic Corridor (EEC) are implemented.

Failure to implement the state-backed projects in a timely fashion or to increase the public investment disbursement rates pose the largest domestic risk to growth, according to the World Bank report, which was released yesterday.

 “The political risk surrounding the long-awaited elections recently held on March 24 remains substantial,” the report said. 

“The transition to a new government may take longer than expected, potentially affecting the continuity of government programmes and delaying public and private investment decisions.”

The bank warned that the global slowdown would affect the economies of Thailand and its neighbours. The softening growth in East Asia and the Pacific this year and the next largely reflects the global headwinds and a gradual policy-guided slowdown in China, said the report, titled Managing Headwinds, which is the bank’s April 2019 economic update for East Asia and the Pacific.

The World Bank said the region’s economies had weathered the financial-market volatility of 2018 relatively well, largely due to effective policy frameworks and strong fundamentals, including diversified economies, flexible exchange rates and solid policy buffers. Domestic demand remained strong in much of the region, it added.

Andrew Mason, the World Bank’s acting chief economist for the East Asian and Pacific region, warned of downside risks to growth due to further deceleration in advanced economies, the possibility of a faster-than-expected slowdown in China, and unresolved trade tensions.

Mason suggested that in the short term, countries will need to focus on managing global headwinds, including by strengthening buffers.

In the medium term, a renewed focus on structural reforms, including efforts to raise investment and boost human capital will be needed, he said. “To increase resilience to shocks and promote greater economic security, it will be important to continue strengthening social insurance and social assistance,” he said.

While China has been rebalancing its economy, shifting from export-led growth to domestic consumption-led growth, this creates both challenges and opportunities for Thailand and other countries, Mason said.

China is expected to import less intermediate goods in favour of more finished products, he added.

Don Nakornthab, senior director at the Bank of Thailand’s economic and policy department, said that the slowdown in global trade worried him the most. Thailand experienced a contraction of export growth in the first quarter this year, following a slowdown in the latter months of last year, said Don, referring to a 1.64 per cent drop in exports from January to March, compared with the year-earlier period.

“The export decline was more than the Bank of Thailand had expected,” he said. “Usually, it takes about 12 months before Thailand’s exports start to recover. So far, we have not yet reached half way.”

He also shared the World Bank’s concerns over a delay in the establishment of a new government. This may take place in June, but if it is delayed until September, it would affect the investment climate in the public and private sectors and consumer confidence.


Facebook Twitter
More in Business
Editor’s Picks
Top News