KResearch cuts consumption, GDP growth forecast
THE CURRENT low fuel prices are not enough to boost domestic consumption as long as the purchasing power of people in the agricultural sector is weak and household debt remains high, says Kasikorn Research Centre.
The research company yesterday revised down its growth forecast for private consumption this year to 2 per cent from the assumption of 3.1 per cent it made in December. Combining this more pessimistic view with the fact that exports have not recovered, KResearch also lowered its forecast for growth in gross domestic product, from 4 per cent predicted in December to just 2.8 per cent.
Pimonwan Mahujchariyawong, deputy managing director of KResearch, said low world oil prices had put downward pressure on the prices of commodities, including agricultural products, and consequently the incomes of people in Thailand’s agricultural sector had declined.
She said low consumption had influenced the company’s decision to lower its GDP growth forecast. She added that its KR Household Economic Condition Index (KR-ECI) for February stood at 46.3 points, and a level below 50 points means most consumers believe their cost of living is too high.
Furthermore, the KR-ECI on the likelihood of improvement in the next three months was at 46.9 points, meaning households worry over an expected increase in goods prices, which will have a negative impact on incomes and employment in the future.
Pimonwan said the downturn in commodity prices and the global economic slowdown were not positive for Thai exports, reflected by the drop of 3.9 per cent in exports in the first quarter of this year. For the full year, export growth is expected to be flat, she said.
However, if commodity prices follow crude-oil prices steadily upwards, that might help drive Thailand’s export in the second half. Investment by the government and special economic stimulus packages are also expected to take effect in the latter half of 2015.
Siwat Luangsomboon, an economist at KResearch, noted that Thailand used to enjoy export growth from being a top production base for electronics, but it had been unable to keep this position, with Vietnam becoming a major player in this sector.
The gradual reduction of foreign direct investment in the electronics sector indicates that Thailand has been unable to compete with Vietnam, which last year received more FDI than Thailand.
Within five years, the value of Vietnam’s electronics exports is expected to grow at double the pace of Thailand’s.
“Looking ahead, the auto sector, which is crucial for Thailand’s export sector, might face challenges as well as electronics, because Vietnam and Indonesia are looking at becoming production bases. Furthermore, we have to track India closely. If it can pick up its economy, India will become a rival for Thailand in luring FDI,” he said.
