‘Growth to come from govt stimulus, not low rates’

In fact, some expect the central bank to continue to stand pat at the next meeting of its Monetary Policy Committee in May while the government led by Prime Minister General Prayut Chan-o-cha launches stimulus measures to boost the economy ahead of a national referendum on a new constitution. 

Tim Leelahaphan, Thailand economist at Maybank Kim Eng Securities, noted that while the central bank was likely to cut its 2016 economic-growth forecast from 3.5 per cent to 3.1 per cent because of poor exports, domestic demand should continue to rise thanks to the stimulus measures.

“The military government has behaved proactively to boost the economy with stimulus packages. More important, the national referendum on August 7 ‘could’ ask the public if they want the Prayut government to stay on for a certain period of time to oversee the reform process. To us, this means more stimulus packages will come to shore up the popularity of the military regime,” he said.

Meanwhile, infrastructure projects are expected to move forward in the second quarter. 

Jaturong Jantarangs, secretary of the MPC, announced yesterday that the committee had unanimously decided to maintain the policy rate at 1.50 per cent despite lower economic growth than expected. 

Manop Udomkerdmongkol, economist at United Overseas Bank in Bangkok, said he doubted that the new growth forecast would fall below 3 per cent, because of the stimulus measures. Meanwhile, state spending continues to be well disbursed, while tourism continues to grow. UOB’s forecast for Thai economic growth is 3.2 per cent. 

Manop expects the central bank to maintain the rate again at the May 11 meeting, noting that the rate is very low while several downside risks to economic growth persist, particularly financial-market uncertainties and a sluggish global economy. The baht is accordingly expected to weaken from 35.1 per US dollar now to 36 by the end of second quarter.

Nalin Chutchotitham, HSBC Thailand economist, believes that on the back of stimulus measures and investment in some infrastructure projects, growth in gross domestic product this year should be above last year’s 2.8 per cent. 

She also believes that the central bank will not raise the policy rate through to the first half of 2017, to preserve its policy room for negative shocks.“While the political landscape is calm at present, recall that domestic demand has been sensitive to political uncertainty in recent years. Additionally, downside risks remain to the global economic outlook. It would thus be a bit too hasty for the BOT to ease its policy stance at this juncture,” she said.