FTI chairman raises spectre of recession if impasse stays

Economy May 23, 2014 00:00

By Petchanet Pratruangkrai,

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The Federation of Thai Industries has again urged all parties to find a solution to the political impasse, which if further prolonged, could push the economy into a recession.

FTI chairman Supant Mongkolsuthree said six months of political turmoil had proved to be a major problem for the country’s economy and the declaration of martial law could not be a long-term solution.
The export sector will soon begin to feel the effects of the martial law, since foreign confidence has already slumped. 
If the measure is prolonged, foreigners will begin to question Thai firms’ ability to deliver their orders, Supant said.
Meanwhile, Commerce Ministry said yesterday that Thailand would probably miss the export-growth target of 5 per cent this year because of the political problems. 
He said that although the global economy was recovering, Thailand’s internal woes were preventing the country’s exporters from cashing in. 
The ministry will revise the export target in the third quarter.
Supant said foreign companies, especially big corporations, normally saw price competitiveness as secondary and paid more attention to an exporting country’s ability to deliver the products.
Currently, the FTI forecasts gross domestic product to grow by less than 3 per cent, but that could plunge below 1 per cent if negotiations fail to clear up the political situation promptly.
And if that failure leads to an escalation of violence, Supant believes growth will sink into the negative zone.
Meanwhile as political uncertainty continues, industrial confidence has also continued to plunge. Supant said a survey of 1,108 businesses took the Thai Industries Sentiment Index (TISI) to its lowest level in 58 months, since July 2009.
The April TISI dipped to 84.0 on a scale of 100, from 84.7 in March. He said the main reasons for the downward trend were falls in overall orders, sales, production and profits. 
The sub-indices on these four factors fell respectively from 78.5, 77.8, 81.6 and 76.0 in March to 78.1, 77.5, 81.3, and 75.5 in April.
As for industries’ confidence for the next three months, the index fell from 99.1 in March to 98.2 in April, for the same reasons.
Confidence among small enterprises declined from 76.8 to 74.7. Among the gloomiest industries are glass and mirrors, ceramics, and agricultural machinery.
For medium-sized industries, the sentiment index fell from 82.6 to 82, with declines in the cement, industrial-machinery, and printing and paper industries.
For larger companies, the sentiment index fell from 95.4 to 92.9, and here the most affected industries included plastics, automobiles, and automobile parts.