BOT cuts GDP growth forecast to under 3%

THE WORSE-THAN-EXPECTED performance of the export sector has prompted the Bank of Thailand to lower its GDP growth forecast for 2015 to less than 3 per cent, Roong Mallikamas, senior director of the central bank’s Macroeconomic and Monetary Policy Department, said yesterday.
In the first six months, exports, which account for 70 per cent of gross domestic product, contracted 4.84 per cent year on year, while the Federation of Thai Industries (FTI) said the expected improvement of the export sector in the second half would not compensate for the shortfall in the first half.
Thai and other Asian exporters have been hit hard by the global economic slowdown since the start of this year when the BOT first forecast GDP growth of 3.8 per cent before lowering it to the current 3-per-cent projection on March 20.
The next BOT Monetary Policy Committee meeting to forecast the growth rate will be on September 25.
The BOT expects the export sector to contract by 1.5 per cent for the whole year, but it now looks like the drop will be bigger, with Vallop Vitanakorn, vice chairman of the FTI and the Thai National Shippers Council (TNSC), sharing the opinion that GDP growth could be worse than expected.
The TNSC predicts that the export sector will contract by 3.6 per cent in the second half of this year after registering a decline of 4.48 per cent in the first half.
Roong of the BOT said: “The economy will continue with its fragile recovery in the second half from the improved performance of the tourism sector and the slight increase in government spending. It will be better than the first half … and the economic expansion has a chance to approach the revised target, but it might be slightly lower than 3 per cent.”
When asked whether the BOT’s current export forecast of 1.5-per-cent contraction will be adjusted to reflect the Fiscal Policy Office’s prediction of 4-per-cent contraction, she said “our new export figures will be in the same direction” of the FPO.
Roong said the volume of exports might improve in the third quarter, as it would take time for exporters to make new price quotations before new orders can take advantage of the weaker baht, which depreciated to 35.25 – a six-year low – against the dollar.
Exporters will gain from higher revenues, with those in the agriculture sector benefiting the most from the baht’s depreciation.
Vallop said it would take around three to six months, depending on the industry, to quote a new export price and the export sector should improve around September and October for seasonal reasons. This would mean that the weaker baht would have no significant effect on the export sector’s performance until the fourth quarter.
As a result, the overall full-year performance will remain in negative territory, affecting the country’s GDP growth, despite a slight pick-up in the second half of 2015.
The tourism sector should also benefit from a weaker currency, but an economic slowdown in China, which is currently Thailand’s biggest source of tourists, could be a drag.