Export target may be cut to 5-6%

 

 

  

 

 

“Thailand’s export prospects are not promising, given orders under our monitoring this year,” Narongchai Akrasanee, chairman of MFC Asset Management and a member of the central bank’s Monetary Policy Committee, said yesterday.

Thailand suffered a 0.4-per-cent contraction in exports in the first seven months of this year.

The slump in exports and delays in budget disbursement have dragged down economic growth, Narongchai said on the sidelines of the Stock Exchange of Thailand’s Thailand Focus 2012.

The row over a military reshuffle could also drain investor confidence, throwing a wrench into the economic growth engine.

The MPC rate decision will depend on economic development, not government pressure, as economic growth and price stability will be balanced. 

At the MPC’s meeting next Wednesday, the policy-makers would closely scrutinise the export issue and may revise down the economic growth projection from 7 per cent currently. A cut in the 3-per-cent policy rate was also a possibility, as lower growth in the export sector, which contributes 70 per cent of gross domestic product (GDP), could darken the economic outlook.

“I can assure you that there will be no rate hike,’’ he said.

Economic weakness poses a greater downside risk than inflation pressure, he added. 

Boonchai Charassangsomboon, director of macroeconomic policy for the Finance Ministry’s Fiscal Policy Office, said the export target could be looking at a downgrade. 

“In June, we set the growth target at 12.8 per cent, based on data in the first five months of the year. Then, we expected the June and July figures to show improvement. But they turned out to be below estimates. In September, the annual target will be reviewed. If the average export value [in the remaining months] is below US$20 billion [Bt600 billion] a month, this year’s exports will grow only 5-6 per cent,” he said.

The office is now closely monitoring euro-zone developments. In focus are the US Federal Open Market Committee, which might embark on a third round of quantitative easing, the German Constitutional Court, which might rule that financial assistance to euro-zone countries violates the charter, and the third round of financial assistance to Greece.

Paiboon Ponsuwanna, chairman of the Thai National Shippers’ Council, a grouping of exporters, said the 2012 export target of 5.9 per cent was put under review due to the euro crisis. The new projection should come out within two weeks.

Normally, the second half contributes 60 per cent of annual exports, but given the erosion in global purchasing power, it might be difficult to boost exports in the third and fourth quarters. 

“We’re still hopeful that the target is achievable, but lower purchasing power shows that it would be hard to push fourth-quarter exports,” he said.

Despite slowing exports, the Fiscal Policy Office maintains the GDP growth forecast at 5.7 per cent, thanks to robust domestic consumption and private investment. 

Narongchai expressed concern over slow government budget disbursement. There is meandering progress on the Bt350-billion water-management budget. He supported the government’s plan to invest Bt2.2 trillion in infrastructure, as Parliament would be soon asked to approve the borrowing.

Lack of public investment has resulted in a bottleneck in infrastructure, which is needed to facilitate economic and social development, he said.

The National Economic and Social Development Board and Bank of Thailand have scaled back their GDP growth projections from 5.5-6.5 per cent to 5.5-6 per cent and from 6 per cent to 5.7 per cent, respectively. 

Targeting inflation is the central bank’s duty, but not creating a sovereign wealth fund. If another agency sets up a sovereign wealth fund, it will have to buy foreign reserves from the central bank, he added.