ELECTION WILL boost investment and consumption this year, pushing gross domestic product to 4.3 per cent up from 4 per cent last year, says Standard Chartered Bank.
“Our GDP projection rate is higher than the market consensus of 4 per cent,” Tim Leelahaphan, economist at Standard Chartered Bank (Thai) told a press conference yesterday.
He said the Bank of Thailand which forecast GDP growth rate of 3.9 per cent and other economic research houses would later revise their projections.
He was optimistic that both exports, investment and consumption will drive growth this year.
Currently there are 20 investment projects implemented by the government worth a total of Bt700 billion and the government injection of Bt100 bn each year is equivalent roughly to one per cent of the economy.
Private investment is expected to rise due to higher import of capital and raw material goods. The progress of Eastern Economic Corridor (EEC ) investment project will also draw foreign direct investment to the region. Government is expected to open bidding for investments in the EEC this year, he said.
Private consumption will be boosted by the general election, political parties is expected to launch campaign in the third quarter after two organic laws related to election of House representatives and appointments of senators become effective. Election is expected to be held in November.
Consumption spending may rise 4-5 per cent year on year from 3 per cent currently , he noted.
Foreign investors would also move back into Thai stock market after they are net sale for many years.
Election and recovery of Thai economy would also draw capital inflows into stock market, he forecasted.
The bank forecasts baht currency will further strengthen. It is expected to reach Bt 31 per dollar, or up 5 per cent this year , after a 10 per cent rise against US dollar last year.
Current account surplus would largely contribute to the baht’s strengthening. The surplus is expected to be equivalent to 7 per cent of GDP, down from10 per cent surplus last year.
The export growth target 6.5 per cent set by the Commerce Ministry is likely to be met.
He projects that the BOT will raise interest rate two times in the second half of the year to 2 per cent by the end of this year.
The US Federal Reserve also may raise its policy rate two times to 2 per cent.
Risks to Thai economic growth are political uncertainty and depressing farm product prices. But the political risk is low now, he said.
Farm sector will still drag the economy due to large numbers of labour, 30 per cent of labour forces. However, it is suffering from lower prices .
The external risk is whether major central banks, such as ECB, BOJ and US Fed, would turn hawkish, raising policy rates faster than market expected, he added.