Govt to trim GDP forecast

The Finance Ministry plans to revise down its economic growth forecast for 2013 next month, an indication of a less-than rosy scenario for the Thai economy in the second half of this year.

Ekniti Nitithanprapas, deputy director-general of the ministry’s Fiscal Policy Office (FPO), attributed next month’s expected downward revision to slower global growth, particularly in China, Thailand’s major trading partner. His office also foresees a further slowdown in the second quarter, which would pressure growth in the remaining months. He said fourth-quarter data was a worry, given last year’s high base.

In the first quarter, gross domestic product (GDP) expanded by 5.3 per cent, against a consensus of 6 per cent. The FPO’s current forecast for the full year is 5.3 per cent, against 5.1 per cent by the Bank of Thailand. The National Economic and Social Development Board (NESDB) last week revised down its full-year forecast to 4.2-5.2 per cent, from 4.5-5.5 per cent. 

Yesterday, the Thai National Shippers’ Council (TNSC), a club of exporters, announced its consensus that Thailand’s exports this year would expand by only 4.9 per cent, well below the Commerce Ministry’s target of 7-7.5 per cent. The forecast will be reviewed after the second quarter. 

“Orders in the first half usually account for 40 per cent of total export demand. The situation is worrying, given speculation on the Thai baht, which should continue despite a cut in the interest rate. We may need to review the forecast again after the second quarter. It’s very likely that the forecast will be revised down in the absence of any measures,” said Paiboon Phonsuwanna, adviser to the TNSC chairman. 

The club plans to ask the government to set up a Bt100-billion relief fund to shore up export competitiveness.

Manufacturing, consumption and investment in April showed signs of slowing, according to the FPO. The Commerce Ministry also revealed that exports in April expanded by only 2.9 per cent, against an earlier announcement of 10.5 per cent. Commerce permanent secretary Vatcharee Vimuktayon said the error stemmed from the use of faulty export figures to Hong Kong.

“We are concerned that this year’s economy will expand at a slower rate. Consumption last year was high due to the first-car scheme. Now, consumption is starting to slow down. And if export expansion is not satisfactory, that could be a concern for the Thai economy,” Ekniti said.

April’s Manufacturing Production Index contracted 3.8 per cent year-on-year. The confidence index in manufacturing continued its decline to 92.9 on operators’ concerns over the stronger baht, which has adversely affected exports. The Agricultural Production Index continued to shrink. Farmers’ real income saw a 10-per-cent contraction.

“There are concerning signs in indicators for the manufacturing and agriculture sectors. These sectors contribute 50 per cent of total output and could indicate the Thai economy is slowing down,” Ekniti said.

Indicators of domestic consumption also rose at slower rates. April’s value-added tax on constant prices edged up 3.7 per cent, compared to a 6.9 per cent increase in the same period of last year. Passenger-car sales rose 22.9 per cent in April, compared to a 101-per-cent surge in the first quarter of 2013 and 269 per cent in the fourth quarter of 2012.

The Consumer Confidence Index in April also dropped for the first time in seven months to 73.9 on worries over rapid appreciation of the baht. Imports of capital goods less planes, vessels and trains shrank 8.5 per cent, reflecting slowing investment. In May, Thai exports showed a second consecutive monthly year-on-year rise, climbing 10.5 per cent. Tourism remained strong with about two million foreign tourists in April, up 19 per cent year-on-year. 

To help shore up the slowing economy, the Monetary Policy Committee on Wednesday cut the policy rate by 25 basis points to 2.50 per cent. Ekniti said the lower rate is a positive for Thai exports and domestic purchasing power. He suggested a steeper cut.