Kasikorn Research Centre forecasts that Thai economic growth from next year onwards will be mainly driven by exports and private investment.
Growth in gross domestic product for many years has been supported by domestic consumption. However, in the research house’s view, this is no longer the key driver of the economy, Charl Kengchon, managing director of KResearch, said yesterday.
Speaking on the sidelines of the “K-Meet the Expert” seminar held by Kasikornbank, Charl said the cycle of consumption had already peaked as a result of the minimum-wage hike, low interest rates and the first-car buyer scheme.
KResearch predicts that Thai GDP next year will expand by 4.5 per cent, against its latest revision of 3.5-per-cent expansion for the current year.
This year’s forecast has now been slashed four times due to uncertainties affecting the economy. The latest cut – from 3.7 per cent to 3.5 per cent – was due to weaker Thai exports, he said.
The research centre sees the global economy as the key challenge to the Thai economy next year, rather than the Kingdom’s political troubles. The US and the European economies will the key drivers for Thai exports and the economy in 2014, said Charl.
Even though the US had faced deadlock from the partial government shutdown and the debt ceiling, key economic indicators such as the unemployment rate are pointing to a recovery.
KResearch expects the US economy in 2014 will expand by 2 per cent from 1 per cent this year, while the European economy, which the centre believes is now out of recession, could rebound to 1 per cent.
Both markets will support Thai exports achieving healthy growth of 7 per cent, he said.
The MD also said the upcoming Asean Economic Community and rising cross-border trade would attract private investment, as the Kingdom’s immediate neighbours in particular have to prepare their investment to benefit from the opportunities presented by the integrated market.
As to government spending led by the Bt2-trillion mega-infrastructure budget, the research house does not believe the expenditure will significantly drive the Thai economy next year, as the bidding process for each project takes time.
“Only Bt50 billion of the expected government spending of Bt100 billion [in 2014] will happen,” he predicted.
Many economists expect expenditure during the first year of the seven-year infrastructure programme to come in at Bt100 billion, before climbing to Bt300 billion annually in the remaining period.
The political situation continues to influence government spending, he said. However, if it does not worsen to anything like the level of disruption experienced during the rally at the Ratchaprasong junction in 2010 – or during the seizure of Suvarnabhumi Airport in 2008 – the economy should expand by 4.5 per cent next year.
According to Bloomberg, Thailand’s biggest bout of political unrest under the current government has increased economic risks, threatening to crimp a rebound from recession as protests dampen local consumption and investment, while also weakening the currency.
GDP will rise by an average 3.6 per cent this year, according to the median estimate in a Bloomberg survey of 26 economists, lower than a forecast of 4 per cent in August.
GDP probably expanded last quarter from the previous three months after contracting in the first half of the year, a separate survey showed ahead of a report due to be released on Monday.
Prime Minister Yingluck Shinawatra has struggled to contain weeks of anti-government protests against a bill that would have provided amnesty for political offences stretching back to the nation’s 2006 coup, allowing her exiled brother Thaksin Shinawatra’s return.
Concern that the lower house will reconsider the bill after a rejection this week by the Senate has hurt investor confidence.
“The current political environment is a headwind to an already weak growth outlook,” said Euben Paracuelles, a Singapore-based economist at Nomura Holdings.
“This will not only hurt sentiment, but will also have a direct negative impact on real economic activity. The longer this persists, the higher the downside risks to growth.”
The baht is among the worst performers in the last three months out of 11 Asian currencies tracked by Bloomberg.