UTCC slashes year's GDP growth forecast to 3.5%

The Kingdom’s gross domestic product could post growth of only 3.5 per cent this year, down from a forecast of 4.3 per cent, dragged down by local floods and economic problems overseas, the University of the Thai Chamber of Commerce (UTCC) predicts.

Meanwhile, the Thai Industries Sentiment Index (TISI) fell to its lowest level in 23 months, from 91.3 in August to 90.4 in September, according to Federation of Thai Industries (FTI) chairman Payungsak Chartsuthipol.

However, the Thai economy should show stronger growth next year at 4.6-5.5 per cent after recovery in many sectors along with planned government mega-projects, said Thanavath Phonvichai, director of the UTCC’s Economic and Business Forecasting Centre.

The lowered outlook on this year’s GDP growth resulted from many negative factors, both internal and external. These included uncertain global economic expansion, political problems, shortage of labour in the industrial sector, lower export growth, a rising cost of living, dropping prices of farm goods, and impacts from flooding.

Thanavath said the Thai economy was very fragile this year with weak internal growth factors, while the global economy was still in the doldrums.

A major factor hitting GDP growth is slower export expansion. The UTCC foresees Thai shipments growing by only 1.9 per cent this year, down from the previous expectation of 4.1 per cent.

The centre now expects 2013 exports to total US$233.63 billion (Bt7.25 trillion) this year while imports grow by only 3.6 per cent to $258.98 billion, down from an earlier forecast of 7.1-per-cent growth. If the forecasts are correct, Thailand will face a trade deficit of $25.34 billion.

The UTCC also projects that annualised inflation will be lower than the previous target of 2.5 per cent, at 2.3 per cent, because of slowing consumer demand.

Tourism is a key sector that will help GDP growth this year. The UTCC projects that the number of visitors will reach 26.4 million this year, up by 18.3 per cent from 2012. Income to the sector will jump by 19.9 per cent to Bt1.15 trillion.

Based on forecast GDP expansion of 4.6-5.5 per cent in 2014, the UTCC predicts export will grow 6.5 per cent to $248.82 billion, while imports will increase 8 per cent to $279.7 billion. Inflation is projected at 3 per cent next year.

Thanavath said the economy should show stronger growth next year absent serious negative factors.

The government’s investment on two major projects – a transport-infrastructure programme and the water and flood management scheme – should inject Bt50 billion to Bt100 billion into the economy next year. However, if both projects are stalled, it will slow GDP growth by 0.5 percentage point.

 

Low confidence

Meanwhile, the FTI’s Payungsak said the low confidence in the industrial sector was reflected in the latest TISI, which has been below the benchmark 100 level for 15 straight months. Manufacturers are concerned over the adverse impacts from the floods in many provinces, which have affected production and transport. Other worries include the global and domestic economies and continuing political conflict, he said.

Still, industry confidence for the next three months rose from 98.1 in August to 100.5 on hopes purchase orders, sales, production output and business operations would improve by year-end, he added.

The TISI figure for small and medium-sized enterprises declined in September from the previous month, but rose for large industries.

The confidence index was lower in the Central, Northern, Northeastern and Southern regions, but higher in the East.

Potential adverse factors for industrial operators in the next three months are political uncertainty, exchange-rate volatility, higher oil prices, global recession and high interest rates for loans, Payungsak said.

The government could help secure reasonable interest rates for flood-hit manufacturers and manage the baht to minimise volatility. Moreover, it should introduce additional stimulus measures to boost domestic consumption and private investment, and limit rises in fuel and electricity costs, which are key production expenses, he said.

Surapong Paisitpattanapong, spokesman for the FTI’s automotive industry group and vice chairman of the federation, said Thai vehicle exports last month stood at 118,253 units, a new 25-year high. He added that the total number of vehicles produced in September was 194,737, below 200,000 for the second straight month, and down by 16.28 per cent from September 2012, though it was 0.86 per cent higher than August’s output. The number of vehicles produced from January to September was 1,930,251, up 11.99 per cent year on year.

Total domestic vehicle sales last month stood at 94,859 units, below 100,000 for the second straight month, and down by 28.5 per cent from the same month last year and 5.41 per cent less than August 2013. This was a reflection of the expiry of the government’s first-time car-buyer scheme. 

Export of vehicles fully built in Thailand stood at 118,253 units in September, a new 25-year high, up 16.76 per cent from September 2012 and 13.47 per cent from August 2013. Total vehicle-export value was Bt52.35 billion, an increase of 7.08 per cent over September last year.