Chance of recession lessens, says BOT

Economy May 31, 2014 00:00

By Erich Parpart
The Nation

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The Bank of Thailand (BOT) has said the chance of an economic recession has lessened due to increase economic certainty but the Monetary Policy Committee (MPC) next month is still going to slash its projection for the county's economic growth.

Mathee Supapongse, BOT senior director of economic and financial policy, said the economy had most likely hit the bottom and was on the way up due to a potential increase in consumption and investment in the second half of the year.
“The second half of the year should be better than the first half and there is a possibility that we have passed the lowest point of the economy while the chance of a recession is much lower than before,” he said.
He explained that clarity in the government budget for 2015 would increase domestic investor confidence while the Board of Investment would know for sure that various projects would continue to operate as normal. 
He said it would probably take more time to earn back the faith of foreign investors since their understanding of Thai politics differed from domestic investors.
The payments to farmers under the rice-pleading scheme would increase farmers’ purchasing power and in turn it would increase the revenue of businesses that deal with the production of rice, such as fertiliser companies, while consumers in general would probably spend more due to the deceased political uncertainty.
However since it will take time for these positives factors to effect the economy, Methee believe that the MPC will probably lower it projection for the country’s gross domestic products (GDP) growth again this year.
“The GDP forecast has the potential to be better than previously expected but it will not go back to equal to the previous official projection of 2.7 per cent,” he said.
Methee explained the stimulation from increased government spending, private investments, and farmer spending would not all take effect at the same time and their effects on the economy would probably be more apparent next year.
As for the overall economic activities in April, Methee said it was mostly unchanged compared to March as reflected in slow private sector spending and manufacturing production, which had continued to decrease.
The Manufacturing Production Index contracted 3.9 per cent in April due to sluggish automobile and beer production, which had declined as businesses pared down inventories to outweigh softened demand.
Private sector spending was largely flat in April as ongoing economic and political uncertainties continued to mar confidence and when compared on a year-on-year basis, the Private Consumption Index and the Private Investment Index had contracted 0.8 and 4.7 per cent respectively.
In term of exports in April, Methee said merchandise exports had recovered slowly but the exports of agriculture products were restrained by a decline in global agriculture product prices and the slowdown of demand from China.
He said this had resulted in the total value of exports dropping 0.9 per cent when compare to the same period last year. The total export value in April was US$17.092 billion.
As for the stability front, Methee revealed that the unemployment rate remained low while inflation had edged up in both core and general inflations as a result of the increased cost of prepared food and cooking gas.
He said the trade balance had registered in surplus on the back of a contraction in exports. The overall balance of payments remained in surplus.