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NESDB adds voice to chorus of gloom

Cuts 2013 growth forecast to 3.8-4.3%; echoes revisions by BOT, ministry

The National Economic and Social Development Board (NESDB)'s downward revision of its 2013 economic growth forecast to 3.8-4.3 per cent serves as the latest confirmation of the declining state of the Thai economy. It follows similar moves by two other economic institutions - the Bank of Thailand and the Finance Ministry's Fiscal Policy Office.

All three institutions are now less bullish on the country's economic outlook. After yesterday's downward revision by the NESDB, the three see the economy as expanding in the range of 3.8-5 per cent. The Asian Development Bank, World Bank and International Monetary Fund's latest forecasts for Thailand range from 5-5.3 per cent.

Announcing the second-quarter growth rate of only 2.8 per cent, against an expectation of 3.3 per cent, the NESDB chopped its 2013 forecast for the second time this year, following the May revision to 4.2-5.2 from the original forecast of 4.5-5.5 per cent.

Due to the lower-than-expected growth rate, the Stock Exchange of Thailand Index tumbled 47.28 points or 3.27 per cent yesterday. Still, the low growth has not convinced most economists that the Bank of Thailand will cut the policy rate at tomorrow's meeting.

Despite the poor outlook, Arkhom Termpittayapaisith, NESDB secretary-general, agreed that investment and tourism should buoy the economy in the latter half, as well as the government's economic measures. Thailand's tourist arrivals should hit 26.2 million this year, against a previous target of 24.7 million. The previous target represented a 10.7-per-cent increase on the 22.3 million arrivals last year. Meanwhile, oil prices have not changed much despite the growing tension in Egypt. Dubai crude oil is expected to range from US$104 to $109 per barrel this year, against the average of $108.8 in 2012.

"The Cabinet's August 6 measures to boost the second-half economy should support expansion, aside from positive fundamentals for new investment like low interest. Investment projects approved in 2012 should start to take shape this year," he said at yesterday's press conference.

Arkhom admitted that risks remain. Highlighted are the weak demand for Thai exports and the pullback of quantitative easing in the United States. As the global economy should show slower growth, export revenue in dollar terms is expected to expand only 5 per cent (after a 0.01-per-cent contraction in the first half). To achieve this, export value must average $21 billion (Bt658 billion) per month in the latter half of this year, an expansion of over 8.7 per cent, Arkhom said.

As the Bt2-trillion borrowing bill's deliberation has not yet begun, and a court order has put the brakes on the government's water-management mega-project, delays in government spending are highlighted as another factor encouraging the NESDB to cut the forecast yesterday.

In May, it expected . This is now lowered to Bt22.4 and Bt6.6 billion, respectively.

Arkhom urged the government to execute as many projects under the plans as possible in the last quarter, to compensate for constraints on domestic demand.

The political uncertainty is also a risk factor for the economic outlook. With the unfavourable conditions for exports and private consumption, the Thai economy has relied increasingly on private investment and the tourism sector as key economic drivers. Even though the general environment is favourable for both sectors, their expansion in the second half will be sensitive to any political tension.

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said yesterday that the government would ensure that investment projects were expedited. He also said the government had 20 measures to ensure growth reached its full potential.

The Royal Bank of Scotland said in a research note that the situation does not look bright for Thailand. While private consumption slows, government projects could be further delayed.

"We do not see any changes to these problems in the near term. Indeed, the government has lowered its full-year forecast range to 3.8-4.3 per cent from 4.2-5.2 per cent previously," it said.

It also believed that the slowdown would pave the way for a rate cut. Growth is not being suppressed by high real rates, but rather by weak global trade and an unsupportive fiscal policy, it said.

Benjarong Suwankiri, an economist at TMB Bank, agreed. "The decline is gradual. The MPC is likely to maintain the rate and observe the global conditions late in the third quarter or early in the fourth quarter before taking any action."


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