ADB pegs 2014 Thai GDP growth at 4.9%, warns of external risks

The ADB has lowered its growth forecast for Thai gross domestic product to 3.8 per cent this year, from 4.9 projected previously. Slower growth in the first half of the year and a not very bright outlook for the rest of the year are main factors for the revision, said Luxmon Attapich, senior economist at the bank’s Thailand office. 

Growth next year should be better, at 4.9 per cent, down from the 5-per-cent forecast in April, she said. 

However, she warned: “Unexpectedly slow economic growth in major industrial economies or China could pose risks to the outlook.” The US government’s partial shutdown may be short-lived and not have much impact on the global economy. “However, the US debt-ceiling issue could be more serious if it leads to less spending by the US government. Then it will have a chain reaction adversely effecting the US economy, the global economy and Thai and other countries’ exports,” Luxmon said. 

The US government will hit its self-imposed debt ceiling of US$16.7 trillion (Bt523 trillion) in the middle of this month. Should US President Barack Obama not get cooperation from the Republican-led House of Representatives to raise the ceiling by October 17, the government is expected to default on debts and could impose cuts. 

Luxmon is also worried about the possible delay of Thai government investment projects, which could dampen the economy. Should the infrastructure project worth of Bt2 trillion and water management-projects worth Bt350 billion go as planned, more government spending would be injected into the economy next year, she said. 

The Constitutional Court is to announce tomorrow whether it believes the 2014 budget bill violates the charter. The government has delayed seeking royal endorsement for the bill and this has resulted in a delay in budget disbursement, which should have started on October 1. 

Luxmon said the ADB was also closely monitoring Thai political tensions that may have an adverse impact on the growth rate. The Pheu Thai government is now facing many legal challenges, stemming mainly from proposed constitutional amendments. 

Regarding the region as a whole, the ADB says slow growth in China and India and jitters over the US quantitative-easing programme will weigh on the Asia-Pacific region’s growth prospects in the near term. The bank lowered its GDP growth forecast for the region to 6 per cent, from 6.6 since in April. For 2014, growth is now project at 6.25 per cent, down from 6.7 in April. 

The ADB also called for Thailand and other Asian governments to undertake governance reform. 

“Asia’s growth has outpaced the rest of the world, but governance reform lags,” it said in an updated report on the outlook for 2013. 

Developing Asia’s GDP per capita increased from 5.5 per cent of Organisation for Economic Cooperation and Development economies’ in 1980 to more than 18 per cent in 2012, but governance has not kept up, Luxmon said. Southeast Asia in particular has been weakening in government accountability to its people. 

The report stated that governance mattered for attaining high levels of income and better social outcomes: “Good governance and growth are positively associated; Asia is not exception.” 

Luxmon also said the government was trying to reduce the amount of rice subsidy by imposing new conditions on farmers.