Morgan Stanley slashes economic growth forecast to 4.9%
Morgan Stanley revised its 2006 economic growth forecast to 4.9 per cent from 5.4 per cent as it expects political uncertainty to delay investment recovery for at least two quarters.
"The risk is that the political uncertainty lasts into the fourth quarter and beyond and its impact on the economy is greater than we currently expect," Morgan Stanley said in a summary issued yesterday.Singapore-based Fitch Ratings also said Asia's political backdrop had recently become less favourable for growth, with worrying developments in the Philippines, Thailand and Taiwan. After numerous upgrades in recent years, emerging Asian countries' sovereign ratings could now fully reflect the region's strong external liquidity position, it said. Fitch Ratings said economic growth in emerging Asian markets would decline to 7 per cent this year from 7.5 per cent in 2005, as export demand eases in line with a slowing of the US economy. Bank of Thailand Governor Pridiyathorn Devakula said the political tension had reached its peak and economic growth should not be affected. "Foreign investors, importers and exporters show no fear and there is no sign of economic slowdown," he said. Private-investment growth should be 10 per cent this year while tourism should achieve the growth targeted for the sector, he said. Pridiyathorn added that no foreign exchange had flown out of the Kingdom, which should maintain the dollar/baht exchange rate. International investment bank Morgan Stanley said investment recovery was badly needed to sustain economic growth in a fully employed economy. While the government has recently cut its predicted Bt250 billion of investment in government-initiated mega-projects this year to Bt150 billion due to political uncertainty, private-sector investment, especially that complementing the mega-projects, could also be delayed. The cooling housing market has already slowed private investment, and the outlook for investment is quite poor this year. Fitch Ratings said the current political environment is likely to relegate Thailand's key policy initiatives to the sidelines, requiring the private sector to play a more crucial role in the interim to support the overall economy. "One glimmer of hope is that Thailand's solid export performance could push the private sector to invest in building capacity regardless of the political environment. Such a mitigating factor, however, is unlikely to reverse the decelerating trends elsewhere," Morgan Stanley said. The Nation
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