BOT slashes GDP forecast to 4.2%

 

The 2014 forecast is maintained at 5 per cent. In this scenario, inflation is forecast to weaken from 2.7 per cent to 2.3 per cent in 2013 and from 2.7 per cent to 2.6 per cent in 2014.

"Thailand’s economic growth has been revised downward in line with delayed global recovery and moderated domestic demand. Given slower growth in China and Asia, Thailand’s export recovery is assessed to be delayed. On top of that, the vital contribution from domestic spending is viewed to lessen," the BOT said in the latest Inflation Report.

Global economic outlook softens from weakened growth prospects in China and Asia. On the other hand, recovery in the US continues to gain traction on the back of improving domestic fundamentals, while the Japanese economy benefits from the unprecedented stimulus policies and the euro area economy appears to stabilize. The positive contribution from G3 economies, however, could not entirely counteract the downside pressure from China and Asia. 

On the financial side, near-term market volatility is expected due to the anticipation of Fed’s tapering of asset purchases, which could induce further capital outflows from emerging markets.contribution from domestic spending is viewed to lessen. 

Private consumption growth is projected to moderate in line with (1) the boost from the first-car scheme that dissipates sooner than expected and (2) the accumulated household debt that starts to weigh on durable and semi-durable purchases. But looking ahead, household spending appears poised to resume a normal pace, thanks to favorable non-farm income and relaxed monetary conditions. Private investment is expected to grow at a lower rate especially in 2013. 

Given their current excess capacity, businesses could manage to postpone investment awaiting positive developments of demand at home and abroad. Nonetheless, businesses’ need to improve their production process, coupled with their overall financial strength, should allow investment to gather pace going forward. Fiscal impetus also declines from slow disbursement by local administrative organizations and delayed spending on water management projects.