Bangkok, Central region hit hard in fourth quarter with GDP set to contract 7.8 per cent, says chamb

The gross domestic product (GDP) in Bangkok and the Central region is expected to contract sharply by 7.8 per cent year on year, Thanavath Pholvichai said. 

Thanavath is the director of the university’s Centre for Economy and Business Forecasting. 

He explained that the Central region accounts for 60 per cent of the country’s output, but as several industrial estates in the area had been severely damaged by the deluge, investment and production had been badly affected. 

In addition, the farming sector has also been brought to its knees. Thanavath added that the Central region could only be expected to show full-year growth of 2.5 per cent. The Northeast, however, has been driven by consumption and investment, with fourth-quarter growth expected at 2.7 per cent as farmers can sell their crop at a higher price thanks to the government’s rice-pledging scheme, he said. 

Growth for the entire year in the region is expected to be 2.7 per cent. 

The North has also been badly affected by the floods, with its fourth-quarter growth expected to contract by 1.3 per cent, leading to much lower growth for the entire year. 

The South, meanwhile, is expected to expand 2.5 per cent in the fourth quarter driven by tourist spending and rising price of farm products. The region’s full-year growth is expected to be 1.1 per cent. 

Thanavath added that the national economy is expected to contract by 3.7 per cent in the fourth quarter of this year and its growth for the entire year should be no more than 1.4 per cent due largely to severe flooding. However, he said, the economy should start recovering by the second half of next year, largely driven by public investment and domestic consumption, helping the GDP expand 4.7 per cent. The government and banks are expected to inject about Bt500 billion into the economy through post-flood reconstruction projects. 

He said he expected the central bank to raise the key policy rate by 50 to 75 basis points to curb inflation next year. 

However, if the world economy recovers, inflation would accelerate as a result of oil price going beyond US$100 (Bt3,100) per barrel, he said, adding that he did not expect political instability in the near future. Though fears of the global economy weakening are still valid, there is only a 25-per-cent chance of there being another worldwide recession next year, he said. 

He said that GDP growth rate may rise as high as 5 per cent next year, as forecast by the government, if the private sector starts to make more investments. 

Their investment decisions, however, would depend on whether or not they are convinced about government measures to prevent floods in the future. 

More foreign tourists would also lead to more consumption and higher economic growth , he said. His forecast is based on the assumption that the world economy would see recovery in the second half as latest data suggest that the United States and Japan would both improve, he said. However, Europe may remain at the bottom due to the lingering public-debt crisis, he added.