KResearch cuts GDP growth forecast again to 3.7%

Early in the year, KResearch targeted growth in gross domestic product at 5 per cent before trimming it to 4.8 per cent and then 4 per cent. The research house yesterday decided to cut the forecast again to 3.7 per cent to reflect export figures and the weaker manufacturing sector.
Kangana Chokpisansin, head of macroeconomic research, said the revision did not indicate economic problems but the new figure represented a clear picture of lower levels of spending and private-sector investment.
KResearch also cut its export-growth forecast to 1.5 per cent from the previous estimate of 4 per cent in line with what it views as the actual situation. However, it is bullish on the Thai economy in 2014 given that the export sector will be its main driver, while improved export growth should be seen in the final quarter of this year, she said.
“We expect the Thai economy to bottom out in the third quarter, and export figures should show growth from this month onwards after the drop in the past several months.”
The expected recovery in the export situation will help carry the economy next year, as key markets such as the United States, European countries, Japan and China improve.
The research firm predicts that GDP in 2014 will resume growth of 4.5 per cent, led by the export sector, which is expected to grow by 7 per cent. However, private consumption will continue to be affected by economic uncertainty.
The price of oil is expected to spike next year if the situation in Syria becomes more tense, and this will have an effect on Thai GDP, Kangana said. She noted that based on the assumption of an increase in the global crude-oil price by 10 per cent, the Thai inflation rate would be increased by 0.7-0.9 percentage point and GDP growth would drop by 0.5-0.7 point.

Currency volatility
Currency volatility next year will gradually ease after increasing in 2013 from the unclear picture of what the United States planned to do about its quantitative-easing (QE) programme, she said.
The US Federal Reserve, which will nominate a new head next February, now is expected to taper QE gradually instead of a sudden exit before ensuring that the US economy will recover.
The economist said the Fed was expected to increase its fund rate in 2015, which will pressure the Bank of Thailand to raise its policy rate as well.
Even though some neighbouring countries have raised interest rates, KResearch notes that the BOT’s policy rate is suitable to deal with capital flows, inflation and household debt, said Charl Kengchon, managing director of KResearch.
Kevalin Wangpichayasuk, head of money and banking research, said automobiles and parts, processed food, and gems and jewellery were three business segments that would be able to grow thanks to the recovery of key economic markets. However, the weaker Indian rupee and Indonesian rupiah might present a challenge for Thai export of agricultural products and for tourism.