UTCC lowers GDP growth forecast to 5.6 per cent

“The economy will face double shocks from both internal and external factors,” Thanavath Phonvichai, director of the university’s Economic and Business Forecasting Centre, said yesterday. “The global economy has been more sluggish than expected. Exports will grow only by a single digit, and that will cause Thailand to run an accounts deficit for the first time in 15 years.” 

Gross domestic product could also continue to show slow expansion next year as the global downturn bites harder.

The US economy is likely to miss its 3.5-per-cent growth forecast by a long shot, down to a tepid 2 per cent this year. The European Union could contract by 3 per cent. China will limp along at below 8 per cent, while Japan’s GDP will bulk up by 2.4 per cent. The insipid growth of those economic giants will dampen Thai exports this year, the centre predicts.

The private-sector think tank said its study showed that Thailand would face its highest account deficit since the 1997 Asian financial crisis after its export engine started misfiring from last year’s flood and the global economic woes. Thailand could start turning in trade deficits of US$10 billion a month.

Exports are now projected to grow by only 8.7 per cent in 2012, down from the forecast of 10.3 per cent early this year. Imports could likewise slip from 20.4 per cent to 18.1 per cent. 

Consumer demand will not be as vibrant as the government hopes, despite the increase in the daily minimum wage to Bt300 in seven provinces this year, the centre says. The rising cost of production has put upward pressure on prices, and this will blunt consumer demand.

 

No boost from agriculture

The farm sector will not help boost the economy as much as expected. In particular, rubber prices are dropping, while rice prices are not as high as expected. 

This will choke growth in domestic consumption, said the centre, also noting that lower demand will result in lower inflation this year. 

Benign inflation could give the government room to ease the policy interest rate down by 25 basis points before the end of the year.

The policy to float the price of gas will also push up goods prices and logistics costs, the centre says. The government should raise the price of gas gradually so that people can make adjustments.

Although the Constitution Court last week defused the charter-amendment crisis, political conflicts could be rekindled and challenge the country’s GDP growth, Thanavath added.

The service and tourism industries will be the major engines propelling growth this year. The centre’s study estimates the number of visitors reaching 20.4 million. 

However, investment will build up more gradually, by only 9.8 per cent compared with 10.8 per cent predicted early this year, because of the political instability and concern over the floods repeating themselves.

To ensure strong momentum of the country, the government should speed up its mega-project investment, ensure political stability and continue flood-prevention measures urgently, the think tank said.