KResearch lowers GDP growth forecast to 1.6%
Kasikorn Research Centre has lowered its projection for this year's growth of gross domestic product from 2.3 per cent to 1.6 per cent because of the slow recovery of the export sector and lower number of tourists when compared with last year.
However, it also said households’ sentiment regarding their costs was at its highest level in eight months thanks to the increased political stability. Their sentiment for the next three months is also positive, with less worry over the cost of living and job stability. However, consumption will still be limited by the high level of household debt.
Kangana Chockpisansin, KResearch head of macroeconomic research, said the military regime’s economic stimulus package would certainly help GDP growth, but this would be offset by the disappointing performance of the export sector.
“We expect exports to contract by 0.3 per cent this year. Along with the contraction in the tourism sector, this has contributed to the downward revision of our GDP growth [forecast] for 2014,” she said.
KResearch has said its outlook for 2015 is also gloomy given the fragile recovery of the global economy, especially in the euro zone, which is currently in a slow-growth and low-inflation period that is expected to drop even further. Meanwhile Japan’s economic recovery has been affected by the increase in its value-added tax, which is also expected to rise even further next year.
China’s economic growth this year and next might be lower than what Beijing expects, Kangana said. The major economy that has the most positive outlook seems to be the United States, but that is not enough to offset the slowdowns of Thailand’s other trading partners, and KResearch predicts export growth of only 3.5 per cent next year. The KResearch Household Economic Condition Index (KR-ECI) increased from 43.8 points in August to 45.3 in September, while the index for household sentiment in the next three months increased to 47.1 points, which is creeping towards the equilibrium mark of 50 points.
If the KR-ECI were to go higher than 50 points, it would mean survey respondents are not worried about their cost of living.
The index sank while anti-government protesters were besieging Bangkok at the beginning of the year to around 42 points in March, but it has been on an upward trend since July.
“Households’ wariness regarding living costs has continued to decrease and their consumption level during the next three months is expected to improve from the lower price of products due to lower energy costs in terms of the oil price, and operators are also holding their product prices,” Kangana said.
She said households were still worried about an eventual increase in goods prices, speculation on the oil price, and the high level of household debt. But the overall sentiment is improving because they are not worried about their jobs and they expect more income in the near future.
“Debt will continue to be worrisome for households’ [budgets] and will put a constraint on their purchasing power. Therefore the recovery of private consumption will be limited next year,” she said.
KResearch expects private consumption to expand by 3 per cent next year, an improvement on its 2014 prediction of 0.8 per cent. That should support the economy, as would the increased government spending. Therefore the house has projected next year’s GDP growth to be 3.5-4.5 per cent.
