After deceleration, economy to grow 5 per cent in 2014

Thailand’s economy is expected to expand 5.1 per cent next year, according to the Fiscal Policy Office, thanks to a low base this year as lower-than-expected exports led many experts to revise the forecasts downward.

The Finance Ministry’s think tank said next year’s growth would be higher thanks to the expected gradual economic recovery of trading partners, which would benefit the country’s export and service sectors. The low interest rate will also support private consumption and investment.

However, this year, the office has revised downward the economic growth forecast to 3.7 per cent from the June forecast of 4.5 per cent. At the October 16 meeting, the Bank of Thailand’s Monetary Policy Committee will review the growth forecast this year. 

In July the central bank had already revised the growth forecast to 4.2 per cent, down from the previously predicted 5.1 per cent, due to the faster-than-expected decline in momentum from the country’s economic stimulus package and the slow recovery of the export sector. In August, the National Economic and Social Development Board revised downward the growth forecast for 2013 to 3.8-4.3 per cent, the second revision this year, following its May revision to 4.2-5.2 from the previous forecast of 4.5-5.5 per cent. 

“The 3.9-per-cent export growth in August after the decline for two consecutive months sent a positive signal that exports for the rest of this year would witness positive growth every month. But it is difficult to reach the 4-per-cent growth target this year, considering our export value in the past three years has never reached US$21 billion per month,” said Fiscal Policy Office director-general Somchai Sajjapongse.

He said the government could disburse Bt600 billion of the 2014 fiscal budget during October-December to help cope with falling export revenue. The “front load” budget will come in six parts – Bt6 billion of state officials’ bonus in fiscal 2011 and 2012; Bt2.5 billion of seminar budgets; over Bt10 billion from the road maintenance budget; Bt6.8 billion from water source conservation and restoration; more than Bt10 billion from the budget for utility system maintenance; the annual budget for purchasing hardware; and the budget allocated to local administrative bodies. 

He said the economy this year is expected to grow slower than previously forecast, due to the slowdown in the first half. If the country wants to achieve GDP growth of 4 per cent this year, the government has to speed up budget spending. He believes that GDP growth in the third and fourth quarters would expand to at least 2 per cent each.

The office also forecast the growth of the export sector at 1.8 per cent this year, lower than the 4 per cent projected by the Commerce Ministry. While the sector showed signs of recovery in August and in the last quarter this year, these are unlikely to help it achieve the growth target. 

Somchai believes the economy would show positive growth in the third quarter, indicated by positive economic indices in the past two months, including the export growth in August. He noted that private consumption has also expanded, reflected in higher VAT collection in the past four months. VAT collection expanded 1.7 per cent in August. Private investment also showed good signs, reflected in the expansion of cement sales of 4.7 per cent in August due to the growth of the property sector. 

Meanwhile, BOT Governor Prasarn Trairatvorakul yesterday expressed concerns over weak export demand and slower-than-expected private spending. He is also concerned about the climbing household debt and the delay in the business plans of some private companies. Regarding exporters’ complaints about the dollar/baht exchange rate volatility hurting their competitiveness, he said the central bank would use all available tools to ensure the baht moves in line with economic fundamentals. 

The baht dropped 0.6 per cent from a week ago to 31.31 per dollar in Bangkok, the biggest loss since the five days ending August 30, according to data compiled by Bloomberg. The currency fell 0.4 per cent yesterday and has retreated 1.4 per cent from a two-month high of 30.88 achieved on September 20 after the US Fed decided to maintain its stimulus. 

Due to weak export demand, Thailand’s capacity utilisation in the first eight months of this year stood at 65.29 per cent, according to the Office of Industrial Economics.