The Bank of Thailand has conceded that as the prolonged political row paralysing the government delays public-sector investment, this year's economic growth may be less than 3 per cent.
However, the central bank is not currently worried about the exchange rate, as the baht’s movements are not out of line with its regional peers.
BOT spokeswoman Roong Malikamas said the Monetary Policy Committee was expected to revise its forecast for growth in gross domestic product at its next meeting.
“The previous [growth] estimate came in November when there was no political impact. Economic figures were based on those in November. In this [upcoming] meeting, political factors that could cause delays in government spending will be considered,” she said. Some disbursement of the current fiscal year’s budget has taken place, and several projects are under way. However, others may confront delays, which could have knock-on effect for private investment.
Disbursement of the 2014 government budget will be lower than the targeted 95 per cent because about half of state agencies have been temporary closed in response to the demonstrations.
Manas Jamveha, director-general of the Comptroller-General’s Department, said the impacts from the slow disbursement would be seen more clearly from the second quarter of the fiscal year onwards. But the disbursement in January of Bt922 billion exceeded the target by 9.75 per cent.
The department is assessing the situation and will propose a revised disbursement target at the next meeting of the committee overseeing the disbursement.
As well, at least Bt100 million worth of investment on state projects cannot go forward as planned because government ministers are unlikely to approve them for fear of breaching Article 181 of the Constitution, which governs the scope of authority of the caretaker Cabinet.
Manas added that the disbursement of officials’ salaries had faced no problems and had proceeded as usual.
Meanwhile, Roong said the unemployment rate remained satisfactorily, but there could be less overtime work, and consequently lower incomes for some.
Headline inflation is forecast at 2.4 per cent this year, and core inflation is projected at 1.2 per cent.
Thailand could gain from the recovery of the global economy, she said, adding that the central bank would wait to see Thai economic figures for 2013 and early 2014, and the National Economic and Social Development Board’s 2013 growth figures, before revising its own growth forecasts.
She said projections for both GDP and export growth might be lowered.
She added that the BOT had been able to cope with the prolonged political protests, even though its headquarters could not be opened as usual.
Roong said the political situation was partly factored into the money market and the baht was moving in line with its peers in the region. The major factor affecting the baht is US monetary policy, she said, but expressed no concerns over capital outflows.
Disbursement of banknotes to commercial banks for the period January 22 to February 3 totalled Bt20 billion, higher than last year as the Chinese New Year falls in January. The Year of the Snake began on February 10, 2013.