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World Bank may lower Thai growth forecast

Amid global sluggishness, tourism seen as key factor; outlook expected to be better for 2014

The World Bank could lower its forecast for Thailand's economic growth this year, amid global sluggishness that is fuelling a sharp plunge in export revenue and massive fund outflows.

While global economic recovery may boost exports in the second half, Kirida Bhaopichitr, the World Bank's senior economist in Bangkok, said tourism would be the key growth factor this year, while other indicators showed lower growth in gross domestic product than previously forecast. However, she expected a higher growth rate in 2014.

Personally, she said she expected GDP this year to grow by 4-4.5 per cent. In its December economic monitor report, the World Bank forecast the Thai economy to expand by 5 per cent in 2013.

"Given high bases in 2011 and 2012 since the inundation and government stimulus, this year could see lower expansion. As normalisation kicks in this year, next year's growth rate could be higher, also because of tourism growth, the government's large spending projects and recovery in the global economy," she said at a seminar on next year's financial-market outlook hosted by the Federation of Thai Industries.

At the same seminar, Somchai Pakapaswiwat, an independent economist, noted that risks to Thai growth remained, with a current-account deficit - the first in six years - and a Chinese economic slowdown that could hurt exports from Asean countries. He foresees Thai export growth below the official target of 7-7.5 per cent.

Despite growth slowing to 4.1 per cent in the first half, Prime Minister Yingluck Shinawatra said the outlook was good and the slowdown was in line with regional movement. She promised more action to boost domestic spending and investment.

While the government will look into how to boost consumer confidence that would spur spending, government-sector efficiency must be enhanced to facilitate more investment, and Commerce Minister Niwatthumrong Boonsongpaisan has been instructed to discuss with the private sector how to boost exports in the long term.

"All parties need to lend a hand to brighten the atmosphere," she said.

Current account deficit worries

The current-account deficit now is raising concerns among foreign investors, as they take the funds they pumped into emerging markets in light of the United States' quantitative easing (QE) back to the US.

So far this year, foreign investors' net selling of Thai bonds has been worth Bt170 billion as of August 22, against Bt110 billion in net selling of Thai equities - most executed since May. The remaining foreign holdings in Thai bonds are estimated at Bt750 billion, from Bt800 billion in June, according to the Thai Bond Market Association. Since the launch of QE in 2010, about Bt140 billion flowed into the Thai equity market, Nomura Research said. Since May, about Bt77.4 billion has been sold, or 65 per cent of the total.

This week, the SET Index lost 7.44 per cent from 1,445.76 points last week, to 1,338.13 points.

Outflows have pressured the baht as well as other emerging-market currencies. The baht opened at 32.02-32.04 to the US dollar yesterday, against the previous closing of 32.13-32.14. In the afternoon, the currency firmed to 31.94 to the dollar, with the greenback's drop below the 32.00 psychological barrier implying the baht's recovery form its low points.

The World Bank's Kirida saw this as part of volatility that Thailand must brace for. Under the managed float system, the currency is able to move in line with economic fundamentals. However, the authorities will need to stay alert, as a too-high volatility rate could hurt Thailand's export competitiveness.

Over the long term, she said Thailand and the rest of Asean would lure back foreign investors thanks to high economic-growth rates.

"In the long term, Asean will remain attractive to investors, despite outflows and currency volatility now," she said.

She expects the Thai monetary authorities to keep the policy rate unchanged at 2.5 per cent given concerns on Thailand's household debts.


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