Economic recovery remains weak: HSBC

The Office of National Economic and Social Development Board today announced the downward revision in the Thai economic growth forecast, citing poor exports as the main reason. The growth forecast is cut from 3.5-4.5 per cent to 3-4 per cent for this year, while inflation is expected to be minus 0.3 per cent or expand by only 0.7 per cent.  

She also noted that given the NESDB's change of GDP calculation methodology, it is impossible to directly compare the old and new GDP series. 

"The economy may have avoided an outright contraction in the first quarter due to the changes to the GDP series," she said, adding the quarter-on-quarter growth rate in the fourth quarter of 2014 ws also revised down.

Given the weakness of economic recovery in the first quarter, HSBC expects that the government will continue to ensure that fiscal spending remains on track or is accelerated. 

"While we do not expect further monetary easing, our forecast is that the policy rate will remain at the current low level for longer - through the first half of 2016 - in order to support the economic recovery," Nalin added. 

The NESDB explained that Thailand’s exports have not benefited from the recovery in global economy. Though, it cited that the Bank of Thailand’s two rate cuts support economic growth, pushing downward the dollar/baht exchange rate which should boost exports from the second quarter onwards.

The Thai economy this year would be supported by public spending, a recovery in private consumption and investment, the continued growth in tourist arrivals, the improvement in industrial production, and low oil prices. 

Yet, the weakening euro and Japanese yen against US dollar as well as declining agricultural commodity prices would keep pressuring exports, private demand and the overall economic growth. The economic recovery this year, after the 0.7 per cent growth last year, would not be spreading to all sectors of the Thai economy.

The NESDB expects Thailand to post only 0.2 per cent growth in exports in 2015, while household consumption would expand by 2.3 per cent. The current account surplus for this year is expected to hit 3.9 per cent of gross domestic product (GDP). 

In the first quarter, private consumption grew 2.4 per cent on year, thanks to the low base in 2014.  The improvement was seen in expenditure in food and non-alcoholic beverages, housing and utilities, fuel consumption, transportation services, personal care and financial services etc. 

Government consumption decelerated to 0.4 per cent, while government investment spending grew by 37.8 per cent. 

Private investment also grew but at a slower pace of 3.6 per cent, mainly due to a slowdown of imported capital goods which partly reflect weak business sentiment. The private sector's residential and industrial building construction continues to see healthy growth, although commercial building construction weakened.

Merchandise exports showed a broad-based decline, largely due to the decline in demand from China, Japan, and Europe. 

The agriculture sector was the main drag on GDP growth, contracting at 4.8 per cent on year.