Economists expect the official figure for first-quarter gross domestic product, which will be announced by the National Economic and Social Development Board (NESDB) on Monday, to show a contraction from the final quarter of last year.
Su Sian Lim, economist at HSBC Global Research, said in the bank’s research yesterday that HSBC was now seeing a much more significant slowdown over the first quarter forecast versus its forecast in March, when it had assumed that growth would remain sub-trend.
To HSBC, the upcoming NESDB economic-growth number for the first quarter is not going to be pretty. Amid a deterioration in the political environment, high-frequency data suggest that the economy may have contracted at by 1.5 percentage points quarter on quarter, the first sequential decline since the first quarter of last year, she said. GDP could, however, have expanded 1 percentage point on a year-on-year basis.
HSBC is reviewing its 2014 GDP forecast of 3-per-cent growth and its 2015 forecast of 4-per-cent expansion, which it has maintained over the past few months, because the fluidity of the political situation has posed downside risks to its forecasts.
“The actual outcome of the first quarter’s GDP report on Monday, coupled with the few data points we currently have for the second quarter and political developments over the next few weeks, will hopefully provide us with a little more clarity on the full degree of the slowdown this year,” she said in the report.
Nevertheless, HSBC’s view on monetary policy remains unchanged. Amid the slowdown, it continues to look for the Bank of Thailand to deliver one more 25-basis-point policy rate cut, to 1.75 per cent.
This is not to stimulate the economy, but rather to ensure that monetary conditions can provide ample support for the economy if and when things start to stabilise, Lim said in the report.
However, TMB Analytics, the research house of TMB Bank, has decided to cut its forecast on Thai GDP growth to 2 per cent this year from its previous forecast of 2.9 per cent ahead of the NESDB report, due to the fact that the prolonged political conflict has significantly affected private spending.TMB Analytics expects GDP for the first quarter will decline 1.7 per cent from the previous three months.
However, the economy has “less chance” of entering recession, it said, because the country has strong fundamentals, which are enough to support economic growth.
Meanwhile, low inflation, low interest rates and the baht’s depreciation remain positive factors to help the economy carry on moving forward, it added. That said, the research house noted that the Thai economy would be at high risk of sluggish growth if a new government could not be formed this year. In such circumstances, GDP growth might fall below 2 per cent.
The NESDB’s report on economic growth is meaningful to the private sector and investor sentiment, because the first quarter’s outcome not only reflects the actual impact of political instability, but also indicates the picture for the Thai economy in the remaining quarters of the year.