Houses ready to lower forecasts for GDP, export growth

Siam Commercial Bank’s Economic Intelligence Centre (EIC) had earlier forecast GDP growth of 5 per cent and export growth of 7.1 per cent, but now will likely lower these, chief economist Sutapa Amornvivat said.

Even those earlier figures were regarded as low, but now the EIC is concerned about the end of the US Federal Reserve’s quantitative easing (QE) and signs that China’s economy is slowing, both of which would could hurt Thailand’s export sector.

“We are watching the economic data, and the export growth [esti?mate] has a high chance of being revised down,” she said.

The Purchasing Managers’ Index in April and May showed slow growth, she added.

The projection for the baht exchange rate against the US dollar should be revised as well from the expected 28.5-29.5 because of the changing fundamentals from the expected end of QE.

Although the Fed has not yet officially announced when it will end its QE programme, the market has already reacted with massive capital outflows from Thailand.

Even though the capital outflows are expected to be short-term, they are enough to affect the cost of borrowing. Dollar-denominated borrowing is costing more, and that might drive the cost of baht-denominated loans as well, said the chief economist.

The Fed will finalise its plans for the end of QE at its meeting tomorrow and Wednesday.

TMB Analytics is lowering its growth forecasts for both GDP and export, and will announce the new projections this week, said team head Benjarong Suwankiri. The house earlier projected GDP growth at 5 per cent and export growth at 7 per cent, but the slower growth in China means neither target will be reached.

GDP now is expected to grow by 4-4.5 per cent, while the export growth might be below 5 per cent, he said.

Benjarong said the cost of borrowing was expected to high for a short time because of the bond sales by foreign investors. However, capital will return to the emerging markets because return on investment is higher than in the US and other Western markets.

Charl Kengchon, managing director of Kasikorn Research Centre, said that in February it lowered the GDP growth estimate from 5 per cent to 4.8 per cent and export growth from 10.5 per cent to 7 per cent.

The slowing growth of China might be a drag on Thai exports, but K-Research will wait and see the figures for May, which will be announced at the end of this month, before making further revisions.

The growth figure for GDP might be lowered by 0.5 percentage point, he added.

Kobsak Pootrakool, executive vice president of Bangkok Bank, said it was too early to adjust the projection on GDP and exports even though the outlook for China was likely to weaken.

“We should give time to the global economy, because the US economy is likely to recover, while Japan’s economy is not bad,” he said.

BBL has maintained its target for GDP growth at 5 per cent and for export growth at 8-10 per cent. Kobsak said the bank might consider lowering these if the economic data for the second quarter miss their targets.

Usara Wilaipich, a senior economist at Standard Chartered Bank (Thai), said it maintained its forecast for Thailand’s GDP growth at 4 per cent and export growth at 5 per cent this year. She said the bank’s projections had already been set lower than other houses’ on StanChart’s expectation of continued slow growth of the global economy, including China.

There are no positive drivers of the export market, as even if the US economy recovers, that will not be enough by itself to restore the health of global trade, she added.

At the same time, domestic consumption this year will not grow as strongly as last year because there are no stimulus packages, while the implementation of the public investment programmes is unclear, the economist said.