Lower global growth forecast 'won't affect Thailand'

The World Bank Group’s six-monthly “Global Economic Prospects” report was released on Tuesday. It said the global economic recovery had been weaker than anticipated because of disappointing growth in the euro area, Japan, parts of emerging Europe (especially Russia) and Latin America. 

The euro zone and Japan accounted for more than one-third of the downward revisions to global growth forecasts for this year. Overall, the bank predicted that growth in global gross domestic product would rise “moderately, to 3.0 per cent in 2015, and average about 3.3 per cent through 2017”.

The Bank of Thailand “Monetary Policy Report” last month forecast that Thai GDP would expand by 4 per cent in 2015, which was lower than its August prediction of 4.8 per cent. Its projection for export growth was also slashed from 4 per cent to 1 per cent because “merchandise exports are likely to grow at a lower rate due to weaker trading partners’ demand, especially lower-than-expected growth of the euro-area economies, Japan, and China”.

The World Bank’s latest prediction for Thailand’s GDP expansion in 2015 is 3.5 per cent.

Aphichat Wisitkitchakarn, an economist at Tisco Financial Group, said its estimates for Thai growth would not be influenced by the new World Bank report, as it has long been foreseen that there are uncertainties in the economic recoveries of the euro zone and Japan. He also believes that the falling oil price will have a positive effect on Thailand, since it will encourage domestic consumption and help improve the trade balance because this country is a net importer of crude oil.

Tisco expects Thailand’s GDP to expand by 4.5 per cent in 2015.

Aphichat also believes that the expected stimulus packages in the European Union and Japan along with moderate growth in China will help support the recovery of the global economy, along with the apparent recovery in the United States.

“The US economy is expected to expand by around 3 per cent this year. That along with 1.3-per-cent growth in Japan, which will step into full recovery mode after passing the lowest point, 7-per-cent growth in China, and around 0.1-0.2 per cent in the euro zone should be able to maintain the recovery of the global recovery.” 

Thidasiri Srisamith, first senior vice president of investment management at Kasikorn Asset Management, said the BOT’s export-growth prediction of only 1 per cent this year meant the central bank might have calculated the effect of the uncertain economic recoveries of major trading partners on the Kingdom’s export sector already. Meanwhile the falling oil price should help with the expansion of the country’s GDP, since Thailand is one of the world’s top gainers from cheaper crude.

According to Bloomberg, Thailand ranks fourth when it comes to positive effects on the country’s GDP growth in 2015-2016 when the oil price is US$40 per barrel versus $84. Thidasiri believes that oil prices will remain around $40 throughout the current quarter.

KAsset predicts that Thailand’s GDP will expand by 4 per cent in 2015 and exports will grow by around 2-3 per cent.

Pimonwan Mahujchariyawong, deputy managing director at Kasikorn Research Centre, said the World Bank report and BOT’s latest predictions echoed KResearch’s concerns regarding the recovery of the country’s major trading partners. The research house will most likely lower its export prediction for 2015 down from the current 3.5 per cent in the coming months since it agrees with the two banks’ analyses.

She agreed that the US alone would not be able to support the global recovery but she believes that it will not have to. Quantitative easing by the EU and Japan would help stimulate the world economy, while expected increases in investment in China would also contribute. 

Meanwhile, Morgan Stanley Research reiterated in a paper released yesterday that its economic-growth forecast for Thailand this year is 3.6 per cent, lagging behind the Philippines (6.3 per cent), Malaysia (5.3 per cent), and Indonesia (5.3 per cent). However, Thailand would outpace Singapore, whose GDP growth forecast was 3.2 per cent. 

The oil-price decline is an unexpected boon, and tourist arrivals have turned around. Still, momentum in other macro indicators has remained mixed, with private investment doing somewhat better on a sequential basis while private consumption has stayed flat. 

“The growth recovery [is] unlikely to be a vigorous one,” it said in the paper.

Morgan Stanley Research reiterated that it was negative on the macro outlook as the recovery of domestic demand in the post-coup environment tended to be relatively subdued. Moreover, high leverage and poor demographics look likely to restrain growth, alongside weakened productivity dynamics and a lower global export share. 

In addition, on the policy front, monetary tools appear less efficient in spurring growth given the already high leverage, while the fiscal-policy stance does not appear aggressive. Meanwhile, November export value and volume declined sequentially. 

Separately, the military government has undertaken and put forward proposals for reforms. Some reforms are positive while others are less so, Morgan Stanley Research said. These structural reform measures are unlikely to revitalise the cyclical picture in a hurry, in its |view.