Junta's policies could be good for economy into H2, Deloitte says

Economy June 27, 2014 00:00

By The Nation

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The National Council for Peace and Order's policies are so far helping the Thai economy recover from the recent political unrest and boosted the confidence of consumers and investors, local as well as foreign, according to Deloitte Touche Tohmatsu Jaiyos.

Based on Deloitte’s analysis, the junta’s economic road map could stimulate growth in the latter half of 2014 and promote infrastructure investment for long-term economic development. 
Several public and private agencies have revised their estimates for this year’s growth in gross domestic product in a range of 1.5-3.0 per cent.
The NCPO’s urgent measures could boost domestic consumption and investment for the remainder of the year, Deloitte said. These include a Bt92-billion payment to rice farmers, approval for projects that asked for investment promotion privileges, leaving the 7-per-cent value-added-tax rate unchanged for one more year, acceleration of 2014 state-budget disbursement of Bt1.3 trillion, and assistance for small and medium-sized enterprises.
If global GiDP expands by 3.7 per cent this year as forecast by the International Monetary Fund, Thai export growth could achieve the Commerce Ministry’s target of 5 per cent, Deloitte said.
For the first five months of the year, consumer confidence worsened year on year mainly because of a lack of investors and consumers’ confidence as a result of the nation’s political crisis. After the military took over the nation’s administration in late May, consumer and investor confidence improved.
The Bank of Thailand says SME demand for credit has increased and the three-month business confidence index reached 52.2 (figures above 50 indicate positive confidence). The SET Index has also risen above 1,400 points.
Based on BOT data and financial and business institutions’ information, consumer products, food and beverages, and retail business are expected to make fast recovery thanks to the urgent economic measures. 
As a result of increases in consumer and investor confidence, durable goods like automobiles, motorcycles, electrical appliances, and furniture, along with tourism-related businesses, are expected to recover in the next period.
Recoveries in businesses related to state investment and expenditures, and businesses demanding long-term investment like construction materials, construction, property, and alternative energy are expected to follow. 
Worsened relations between Thailand and the United States and the European Union are risks to GDP growth in terms of Thailand’s exports, investment, economic cooperation and tourism.
Review of Bt100 million worth of state-enterprise investment projects to control spending and prevent corruption could delay state investment in the agricultural sector, which could face declines of crop prices as a result of global oversupply and impacts from the cancellation of the elected government’s populist policies by the junta.
Deloitte urges Thailand to focus on trade and investment among Asean countries, China and Japan, promote tourism and accelerate state spending and public investment. State agencies should have proper measures in place to mitigate against price fluctuations for agricultural products in the global market.