Asian Development Bank to revise down GDP projection for Thailand

Luxmon Attapich said that while the latest government stimulus package would help the economy, it would not be enough to offset the lowering of the ADB’s growth prediction.
The ADB will reveal the new growth forecast for the Kingdom after its meeting on September 22, she told a seminar arranged by Kasikornbank yesterday, adding that it would be the second revision since the 3.2 per cent that was forecast at the beginning of the year.
“We hope that the first-phase stimulus package to help low-income earners will help the economy during the end of this year but its effect on GDP growth will be more apparent by the beginning of next year onwards,” she said.
“The second phase of the stimulus package to help small and medium-sized businesses will obviously take longer [to affect] GDP expansion and its effect on the economy is a story for next year.
“Normally, capital that is injected for low-income earners will circulate, and it will circulate many times, so the effect on the economy will definitely be good, but by how much will remain to be seen,” she added.
The slower-than-expected economic expansion in the first half of the year at 2.9 per cent means that the full-year expansion of more than 3 per cent will be even harder to meet as last year’s base in the second half was even higher. But next year’s GDP growth will be better than this year’s from the expected improvement of economic recoveries in the euro zone, the United States and Japan, while the government’s economic stimulus measures and mega-projects will help support the economy in 2016.
The ADB expects the Thai economy to expand by around 4.1 per cent next year.
Meanwhile, Luxmon said the expected US Federal Reserve rate increase would contribute to further outflow from Thai money markets, but only in the short term, as the market has priced in the factor. The country’s strong basic financial fundamentals, such as a strong current account and high international reserve, means that the Kingdom will be able to cope with the expected fluctuation.
“The increase will not tarnish confidence but there will be some fluctuations in the short term and the world should be able to cope. The Bank of Thailand also has measures such as capital controls and relaxation of outflows under its master plan and system to mitigate the situation if needed and it should have no problem dealing with the situation,” she added.
Other countries in the region are steering clear of a currency war as the drop in currency values in the region’s emerging markets is unintentional and it is just a trend, she said. The baht’s depreciation is along the lines of the regional currencies while strong basic financial fundamentals mean that the depreciation is “not that scary”.