2014 growth forecast could fall below 3% on politics: Asia Plus

 

The 2014 growth target was cut from 4.3 per cent to 3.3 per cent. The house also warned that if there remains no solution within 1-2 months, the forecast could be further cut to below 3 per cent. 

  In a research note, the securities house said that household consumption, contributing 55 per cent to the gross domestic product (GDP), should grow by only 2.3 per cent from previous estimate of 3 per cent. This would allow the overall domestic consumption, boosted by demand in the public sector, to grow by only 2.5 per cent from previous estimate of 3 per cent.

Meanwhile, the service sector, contributing 10 per cent of GDP, could suffer from the political climate. 

In December, tourist arrivals rose by only 6.1 per cent on year compared to the 11.93 per cent growth rate in November. As the impacts should remain in the first six months of the year, the services sector's growth is revised downward from 20.5 per cent to 12.2 per cent.

Meanwhile, export revenue should also grow by only 7.5 per cent, from the previous estimate of 8.3 per cent.

Asia Plus noted that Thailand should have benefited from the global recovery, but for the political stalemate. While some airlines have cut down flights to Bangkok, in the medium and long term the political climate could affect investment and may spur business relocation. 

Due to the lower growth prospect, listed companies' earnings would be under pressure, it said. At present, it pens the 13 per cent earning growth rate. 

The GDP forecast was based on the assumption that Dubai crude oil would remain unchanged at US$100 per barrel this year, while the Thai baht would remain weak at 33 per dollar against 31.5 in 2013. 

Asia Plus also expects the policy rate to end the year at 2 per cent, from 2.5 per cent at present, though inflation would slightly rise from 2.2 per cent to 2.4 per cent.