Saturday, November 28, 2020

Finance Ministry lifts growth forecast to -7.7% after signs of recovery

Oct 30. 2020
Adviser to the Fiscal Policy Office Pornchai Threeravej, centre, says the recovering Thai economy will grow by 4.5 per cent next year.
Adviser to the Fiscal Policy Office Pornchai Threeravej, centre, says the recovering Thai economy will grow by 4.5 per cent next year.
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By The Nation

Seeing signs of recovery, the Finance Ministry has revised its economic forecast for this year, predicting a contraction of 7.7 per cent rather than the previous 8.5 per cent.

The move came after economic indicators for September released by the Fiscal Policy Office on Thursday showed improvement from the month before.

The economy is recovering in the second half of the year as Thailand’s major trading partners start to rebound from the Covid-19 crisis, while government spending shores up the local economy, said Pornchai Theeravej, adviser to the Fiscal Policy Office.

Optimism at the Finance Ministry is matched by the Bank of Thailand, which recently revised its forecast for the economy this year from -8.1 per cent to -7.8 per cent, he said. 

Pornchai added he expects to see economic growth of 4.5 per cent next year.

This year, Thai exports are expected to fall by 7.8 per cent, better than the previous forecast of an 11 per cent drop. Private consumption and private investment are expected to contract by 3 per cent and 9.8 per cent respectively. Meanwhile, government consumption and investment are expected to expand 4 per cent and 10.5 per cent.

The current account surplus is projected at $14.1 billion, equivalent to 2.8 per cent of GDP, which would contribute to economic stability, he said.

September saw VAT revenue – an indicator of consumption – increase 0.1 per cent year on year and 3.3 per cent month on month after seasonal adjustment.

Also rising from August were car sales (32.6 per cent) and newly registered motorcycles (0.7 per cent), though they fell 12.2 per cent and 0.2 per cent from the same period last year. Consumer confidence, however, fell slightly to 50.2 from August due to political protests in September.

Among private investment indicators, sales of commercial cars rose 13.5 per cent year on year and 5 per cent from August. Imports of capital goods grew 4.4 per cent from August and contracted at a decelerating rate at 7.5 per cent year on year, suggesting rising private investment activity. Exports contracted at a slowing rate, at 3.9 per cent.

Sales of cement rose 0.9 per cent year on year. Tax revenue collected on property transactions rose 4.7 per cent from August with contraction decelerating, at 13 per cent year on year.

Looking ahead, downside risks are surging from a leap in Covid-19 infection rates in many countries, the US presidential election on November 3 and the Brexit deal.

Meanwhile, Fitch Ratings has reaffirmed Thailand's sovereign credit rating at BBB+ with a stable outlook.

However, Fitch said it was closely monitoring Thailand’s rising household debt and political unrest for signs it may adversely impact effective policy implementation and economy growth in the mid-term.

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