The Bank of Thailand yesterday cautioned that the economy could have contracted in the first quarter, while brokerages turned bearish on the Stock Exchange of Thailand Index for this new quarter after trimming growth forecasts for GDP and listed companies
“Following the data, there is a possibility that gross domestic product (GDP) in the first quarter shrank from the previous quarter,” said Mathee Supapongse, senior director of the central bank’s macroeconomic and monetary policy department.
Overall economic indicators for February showed a retreat from January, partially due to the protracted political problems that have discouraged consumer spending and investment.
Despite the backsliding in the first quarter, which had been expected by the central bank, the economy looks set to rebound in the second quarter, led by the export and tourism sectors, he said.
However, if the economy continues to stutter, it could slide back into recession.
“This is an issue the central bank will have to closely monitor further in the second quarter, as the definition of technical recession is there will be a contraction for two straight quarters.”
The Fiscal Policy Office (FPO) has been assigned by the Finance Ministry to draw up an economic stimulus package for the consideration of the new government.
Permanent secretary Rungsan Sriworasat said after a meeting of the ministry’s senior officials that the stimulus package would focus on personal consumption rather than taxation.
The meeting also agreed to instruct the Revenue, Excise and Customs departments to seek ways to collect tax much more effectively after the revenue of these three state agencies in the past five months of fiscal 2014 was found to be below target.
The ministry also discussed with the Budget Bureau about the delay in preparing the fiscal 2015 budget, which could drag economic growth down to 2.6 per cent this year from 4 per cent as projected by the FPO.
The lower tax collections could also be attributed to the domestic political unrest and economic slowdown. With the economy stagnating, the VAT will unlikely be raised from 7 per cent back to 10 per cent this September. The ministry also asked the FPO to study how long the 7-per-cent VAT could remain in place. Raising the VAT rate to 10 per cent would hurt many business operators, he said.
Overall economic activity in February softened further from the previous month owing to prolonged political protests, according to the Bank of Thailand’s economic and monetary conditions for February.
The Private Consumption Index fell 2.5 per cent from the level a year ago. Purchases of both durables and non-durables declined as consumers remained cautious about spending, given elevated debt levels and income shortfalls following a sustained economic slowdown.
The Private Investment Index dipped 7.7 per cent as businesses continued to defer investment. Outlays for machinery and equipment continued to decline, as seen especially in the electronic and electric appliance and the automobile industries.
The Manufacturing Production Index dropped 4.4 per cent. Auto production continued to be subdued after having accelerated earlier, with a pickup in overseas orders failing to offset declines in domestic orders.
Merchandise imports plunged 18.9 per cent to US$14.25 billion from last year.