Higher consumption, tourism to drive GDP, but fuel costs a worry
The University of the Thai Chamber of Commerce (UTCC) yesterday raised its economic-growth projection for this year to 5.9 per cent, on the back of expected significant expansion in the second half following higher consumption and strong tourism growth.
However, it warned that the government should curb the price of diesel at no more than Bt34 per litre to ensure stable growth during the first six months of the year.
The UTCC’s earlier estimate for 2012 growth in gross domestic product was 4.7 per cent, because of the impact of the severe floods late last year.
The university’s study cites the fact that for every baht increase in the price of diesel, the economy is slowed by 0.1-0.2 per cent.
Thanavath Phonvichai, director of the UTCC’s Economic and Business Forecasting Centre, said the government should slow down its plan to increase excise duty on diesel in the first half as the rocketing price of fuel would destroy consumer sentiment and shrink economic growth.
“The government should curb the [diesel] fuel price in the first half of the year, as the economy has just recovered from the severe floods. It should consider allowing the price to increase in the second half after the industrial sector has got back to normal operations,” he said.
People are more concerned about higher fuel prices and the cost of living, despite the minimum-wage increase in April, he said, adding that the government should manage fuel prices efficiently, otherwise poorer consumer sentiment and higher inflation would result.
The UTCC now projects inflation coming in at 4 per cent this year, up from its previous forecast of 3.8 per cent, because of higher fuel prices.
The industrial sector is expected to return to normal operations in the third quarter after many industries were badly affected by the flooding. Enterprises will not be able to shoulder higher production costs if they are hit by a combination of higher fuel prices and increased wages in the first half, Thanavath warned.
The industrial sector and private consumption are both expected to increase in the second half after stable economic growth.
The UTCC also predicts that GDP could face slower growth of only 4.5-5.6 per cent this year if global oil prices surge to US$130-$150 per barrel. Under this worst-case projection, the price of domestic diesel would rise to Bt40-Bt45 a litre and inflation could climb to 4.3-5 per cent.
Suvisut Siriwadhanakul, a lecturer at the centre, said the full-year estimate for GDP growth of 5.9 per cent was based on an average Dubai oil price of between $100 and $120. The baht is expected to settle at 29.50-30.50 to the US dollar, while unemployment is forecast at 0.8 per cent.
Other key economic indicators are also expected to show an upward trend this year. For instance, the agricultural sector is expected to grow by 3.7 per cent, industry by 8.1 per cent, investment by 9.8 per cent and private consumption by 4.4 per cent.
The tourism sector is expected to show significant growth at 4.8 per cent, with the number of foreign visitors reaching 19.8 million this year. Tourism income is forecast to rise by 5.4 per cent to Bt768 billion.
The UTCC forecasts that exports will expand by 10.3 per cent to $248.6 billion (Bt7.6 trillion) this year, while imports will rise by 20.4 per cent to $243.1 billion, resulting in a trade surplus of $5.5 billion.
World trade is expected to grow 3.8 per cent, down from the previous forecast of 5.8 per cent, while the global economy will expand by 3.3 per cent, down from the previous projection of 4 per cent, according to the university.