HSBC cuts growth forecast to 3.1%

But it raises the 2016 forecast slightly to 3.3 per cent from 3.1 per cent.

In the first quarter, the economy grew 3 per cent compared to the same period last year and sustained four straight quarters of expansion in sequential terms. Nevertheless, the pace of growth remained slow, and actually decelerated to 0.3 per cent q-o-q from 1.1 per cent in the fourth quarter in seasonally-adjusted terms. Real exports of goods have been the main drag, given weak demand in East Asia. From zero growth last year, exports are expected to increase by 2.4 per cent in 2015 and 4.2 per cent in 2016.

HSBC also lowered the global economic growth forecast this year, from 2.7 per cent to 2.4 per cent. The US growth is expected to be only 2.2 per cent, from the previous forecast of 2.9 per cent released in the fourth quarter.  

Private consumption and investment have also stayed sluggish despite the support from lower energy bills, mainly due to weak sentiment, high leverage, and low income growth.

Nalin Chutchotitham, HSBC economist, noted that apart from economic risks, uncertainties are also building up on the political front, especially with regards

to the timing of the election, which depends on the enactment of a new constitution. The draft charter is currently being amended with suggestions from the government and the public, and it will be put to the vote in the National Reform Council and a referendum. 

"Although we expect the economic recovery to strengthen under the ‘no-unrest’ assumption, prolonged political uncertainty may cap private investment growth," she said.

The bank also lowers the 2015 headline inflation forecast to -0.4 per cent from 0.0 per cent, due to more benign price pressure in the first five months of the year, but continue to expect inflation to rebound in 2016 because of base effects – lowering its forecast slightly to 2.3 per cent. 

"Given this backdrop, and to pre-empt downside risks to growth, there is a higher probability that the Bank of Thailand will ease monetary policy further by cutting its policy rate by another 25 basis points to 1.25 per cent," Nalin said.