BOT plays down stagnation concerns

Economists believe the economy has emerged from a stagnationary period, although there could be a further slowing down of export and tourism performance.

However, given the economic slowdown – and the prolonged period of below-potential growth in particular – Finance Minister Sommai Phasi said he believed the economy was currently in a state of stagnation due to low spending, which stemmed from a lack of confidence. 

That said, the fiscal stimulus provided by the government would enable the country to move to the next economic phase, he said.

Chirathep Senivongs Na Ayudhya, spokesman for the central bank, said that for the first half of the year, it could be said that the economy had been in a state of stagnation, but the situation had now passed. 

Thailand has no unemployment problem, he stressed.

The economy is now in a transitional period and close monitoring is needed for the improvement of economic activities, he said, advising people not to be overly concerned about the situation.

“Presently, the Thai economy is recovering, having passed the stagnation period," he added.

The central bank expects domestic spending for both investment and consumption to be the economic driver for the rest of this year, as well as next year. 

Government policy will become clearer, and this will result in more private confidence, he explained.

“We have to concede that growth may not be as strong as previously, as the recovery is in the early stage and the economy has not made a broad-based recovery yet. The economy has been highly dependent on indebtedness in the past two years. The structure of manufacturing in terms of both the workforce and infrastructure has to be more developed,” said the spokesman.

Charl Kengchon, managing director of Kasikorn Research Centre, believes the economy has already passed the stagnation period, with a likely improvement in growth as a result of the government’s stimulus. 

Stagnation means low economic expansion of close to zero, with below-potential growth, and is normally accompanied by unemployment, he said.

“We are passing through such a [below-potential growth] situation, but there may be more limitations in exports and tourism, which could see low growth,” said the MD.

Benjarong Suwankiri, head of TMB Analytics at TMB Bank, said: “We don’t think Thailand is in a state of stagnation. The country began slowing down from the latter half of last year, but looking forward, the economy is tending to recover.” 

While there could be a risk of stagnation, the fiscal stimulus should improve the economic situation, he added.

Somprawin Manprasert, a professor at Chulalongkorn University’s Faculty of Economics, said that despite low growth, Thailand would not necessarily enter a period of stagnation.

However, if it were to do so, the Finance Ministry could launch short-term measures to drive the economy out of such a situation, he said.

Tada Phutthitada, president of the Thai Bond Market Association, said economic growth next year would have to depend on government spending – and the efficiency of such expenditure – in order to escape from any period of economic immobilisation.