Economy 'must expand faster'

Economy August 01, 2014 00:00

By Erich Parpart
The Nation

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Business organisations agree that the economy in the second half of the year will be better than in the first half but is still underperforming, and competitiveness will be an issue if average growth does not double in the coming years.

Supant Mongkolsuthree, chairman of the Federation of Thai Industries (FTI), said the recovery of public and private investments would accelerate growth.
Speaking at a seminar organised by Than Settakij newspaper, Supant said the approval of the government budget for the 2015 fiscal year, along with the first of longer-term infrastructure projects worth a total of Bt2.4 trillion, would drive the economy in the last half of 2014 and into next year.
Budget Office director Somsak Chotratanasiri said the office expected around 90 per cent the rate of the state budget to be disbursed by the end of the year and around Bt350 billion would be used over the next two months.  
Supant said that apart from the rebooting of investments delayed while the elected government was in limbo, the expected return of tourists from Asia, especially China, and stable domestic consumption – which had improved considerably – would help gross domestic product grow by more than 2 per cent this year.
But GDP would grow by less than 2.5 per cent because of the slower-than-expected recovery of the export sector, which had been hit by the falling price of crops and geopolitical risks in Europe and the Middle East.
“The political turmoil [in Thailand] has stopped, confidence has returned, people have started to spend, delayed projects under the BOI [Board of Investment] have been approved, there is talk of an infrastructure fund, and the disbursement of the 2014 and 2015 government budgets are all positive factors that will boost the economy in the second half of the year,” he said.
Issara Vongkusolkit, chairman of the Thai Chamber of Commerce, said the service sector was expected to recover as a result of increased domestic consumption, and government projects would boost the economy for the rest of the year, although the country needed to lure back foreign investors.
The TCC expects GDP to grow by more than 2 per cent but less than 2.5 per cent.
Boontuck Wungcharoen, chairman of the Thai Bankers Association, said the TBA expected GDP to grow by more than 2 per cent this year on the back of the economic recovery in the second half but he was concerned over a decline in the country’s competitiveness.
“Thailand is like a teenager, which means that if we continue to grow at an average of 3-4 per cent per year and this is the ‘new normal’, we will become an adult that is very short with a lack of competitiveness. He added: “If we want to tackle the problem of inequality, we should not be satisfied with 3-per-cent growth and we should push for growth of 7 per cent, which is an average growth for a teenaged economy.”
Result of slowdown 
Meanwhile, Saowanee Thairungroj, rector of the University of the Thai Chamber of Commerce, told a press conference that the university had revised down its 2014 GDP projection from 2.5 to 2.2 per cent.
Saowanee said that was a result of a slowdown in production, agriculture, spending, exports, and investment due to the effects from an uncertain global economic recovery, falling global crop prices, high household debt, and the high cost of production and living.
At the same time, the Bank of Thailand said overall economic activity in the second quarter had improved on the previous quarter because of the stabilised political situation and government policy clarity.
The BOT expects export growth to be less than 3 per cent this year, which is less than previously forecast,