CIMB Thai expects GDP growth to stay below 5% until 2015
CIMB THAI BANK predicts annual growth of Thailand's gross domestic product will remain below 4 per cent until 2015 because of declining expansion of both local consumption and exports.
Amornthep Chawla, vice president and head of economic and financial market research, said GDP this year should expand by 2.8 per cent and 3.4 per cent next year even if the export sector starts to recover in the fourth quarter of 2013.
Export growth in 2014 is projected at 5 per cent.
While the contribution of exports to the Thai economy is sluggish, public investment has not yet taken up the slack because of legal and political delays.
He said GDP in the third quarter would witness a quarter-on-quarter drop of 0.2 per cent, meaning a decline for three consecutive quarters. In the first quarter, economic growth dropped by 0.3 per cent and by 0.47 per cent in the second quarter.
Amornthep said the Thai economy had previously been accelerated by domestic consumption due mainly to government stimulus packages. But consumption has declined significantly this year, which is pulling down GDP, while savings are sagging as well because of high household debts that resulted from the spending spree of the past few years.
The bank expects Thailand will face tighter liquidity from the lower savings of households.
Bunluasak Pussarungsri, executive vice president and chief economist at CIMB Thai, said the bank early this year estimated GDP growth of 4.5 per cent and then trimmed that to 4 per cent before cutting its forecast yet again to 2.8 per cent.
The house anticipates the central bank’s Monetary Policy Committee to cut the benchmark interest rate by 25 basis points to 2.25 per cent to enhance domestic consumption and private investment.
The policy rate is expected to stay at 2.25 per cent throughout next year and should be increased in line with the US central bank, which will raise the Federal Funds Rate in 2015.
He said a policy-rate cut would not drive up household debt much because commercial banks would retain their current interest rates. Meanwhile there would not be any massive outflow of foreign funds because the Thai rate would still be far from the United States’, which now is 0.25 per cent.
Bunluasak said CIMB Thai was worried that liquidity would tighten in 2015 rather than next year because the US Federal Reserve will taper off its quantitative easing and raise the FFR.
