Thai economic outlook hinges on public spending
Accelerated disbursements of public investment expenditure and more effective implementation of government stimulus packages are highlighted as the only factors to lift the Thai economy, as exports continued sliding.
In a research note, Manop Udomkerdmongkol, a UOB economist, revealed several downside risks which could stem from a sharper slowdown in the Chinese and Asian economies and lower-than-expected crowding-in effects of public investment amid weak private sector confidence.
The bank expects Thailand to register 2.7 per cent in economic growth this year. Manop also expected the Bank of Thailand to maintain the policy rate at 1.5 per cent as it convenes next month. He noted that while current monetary conditions remain supportive to Thailand's economic recovery, the limited policy space should be preserved for future utilisation as there remain downside risks to economic growth from both external and domestic sources.
The bank expects the US$/Bt exchange rate to end the day at 35.50, representing a 7.4 per cent depreciation over 2014.
In September, international trade continued to drop in September.
Exports declined by 5.5 per cent from the same period last year, marking the ninth consecutive monthly contraction. From January to September, the cumulative export value contracted by 5.0 per cent. Exports to some major countries such as Japan, China and the United States contracted again. Key reasons remain the poor terms of trade for agriculture exports, the slowdown in external demand and low oil prices in the world market. The slowdown of the Chinese economy rippled across other Asian economies as well as other commodity exporters, and thus caused Thailand’s trading partners demand to plummet. At the same time, Thailand’s export prices for oil-related products also declined with falling oil prices, while some other merchandise saw price reduction because of a bargaining by trading partners. However, the Commerce Ministry maintained the forecast that the full-year exports should contract by 3 per cent.
Import growth fell by 26.2 per cent, following a decline of 4.8 per cent in previous month. Combined import value in the first nine months dropped by 10.5 per cent, reflecting the persistently weak domestic demand. Subdued domestic and global demand as well as declines in businesses’ confidence resulted in low manufacturing production and private investment. Falling export incomes and the impact of the drought on farmers’ income also prompted households to exercise more caution towards spending and caused private consumption to gradually recover.
Thailand locked in a trade surplus of US$2.8 billion in September and $7.8 billion for the first nine months of this year.
