By Petchanet Pratruangkrai
Negative outlook from Moody's 'would raise firms' costs, hit confidence'
Economic growth could stutter more than expected this year if Moody’s Investor Service goes through with a downgrade of the country’s sovereign rating from “Baa1” to “Baa2”, as foreign investors would start losing confidence and domestic consumers would continue to do so, according to the University of the Thai Chamber of Commerce.
“The economy could grow lower than the forecast of more than 5 per cent to only 4-4.5 per cent this year because of lower consumer confidence from the impact of the gloomy economic expansion and slowing growth of the global economy,” Thanavath Phonvichai, director of the university’s Economic and Business Forecasting Centre, said yesterday.
Consumer confidence slipped for the second straight month in May.
If Moody’s gave a negative outlook, businesses would face higher costs. However, if Moody’s cuts the overall rating to “Baa2”, Thailand would face more difficulty in ensuring strong growth this year as investors would have lower confidence to do business in the Kingdom out of concern over future growth and financial stability.
To keep the country continue on the growth path, the government should accelerate its budget disbursement for the Bt2-trillion infrastructure development project, promote exports, especially cross-border trade, and curb rising fuel prices, Thanavath said.
The economy would continue to decelerate until next quarter.
The survey of 2,247 respondents showed that last month confidence fell to its lowest level in four months from 83.7 points in April to 82.5 points in January. A score below 100 indicates poor confidence.
The slowdown reflects the global economic sluggishness and lower domestic spending.
The lower inflation figure last month indicates that consumers are reluctant to spend their money. Despite low inflation, consumers feel that goods prices are going up this year and this weakens their confidence to spend money.
The poorer consumer confidence last month resulted from the National Economic and Social Development Board’s release of the economic growth rate in the first quarter of this year, which was 5.36 per cent, lower than the expected 6-7 per cent. The NESDB also revised down its full-year forecast to 4.2-5.2 per cent from 4.5-5.5 per cent.
The fall in the SET Index, high trade deficit, rise in fuel prices, political instability and rise in the cost of living also weighed on consumer confidence, he added.
Wachira Khuntaweethep, a lecturer at the university, said lower confidence also caused consumers to hesitate to buy a new car or house, travel or start up a business.
Other indices related to consumer confidence also declined in May from April.
The index for future employment opportunity dropped from 75.5 points to 74.4 points, while the index for future income dipped from 101.8 to 100.4.