Central bank says 4 per cent economic growth possible
February 13, 2014 00:00 By WARIN TRINO, CHAIRAT SRISOOK
THE BANK of Thailand says the economy could expand by 4 per cent this year, if budget disbursement is undertaken efficiently and consumer confidence and private investment recover no later than the second quarter.
BOT spokeswoman Roong Malikamas said yesterday that it was possible to achieve 4-per-cent growth, as estimated by the World Bank, if the fiscal side could ensure fully efficient budget disbursement, and consumer and investor confidence – as well as private-sector investment – recovered during the next quarter.
However, Arkhom Termpittaya-paisith, secretary-general of the National Economic and Social Development Board, said at yesterday’s “Property, Major Economic Indicator 2014” seminar that the Thai economy this year is trended to grow lower than the previous expectation of between 4 per cen to 5 per cent and lower than that of last year, which is expected at 3 per cent by many research houses, due to the prolonged political situation.
“The previous GDP [gross domestic product] figure is for expected growth of 4-5 per cent [this year]. This depends on whether the political problems end soon. Thai exports will likely grow higher than last year’s level, due to the global economic recovery.
“However, if the Thai political situation does not ease, it’s not certain the economy will grow as expected. But the economy will not likely face a shock,” The think-tank earlier predicted that the economy would expand 4-5 per cent this year, driven mainly by exports. It will announce economic data for the final quarter of last year on Monday.
BOT director Don Nakornthab said at the same event that 2015 fiscal-year budgeting could face a one-quarter delay, as budget-related agencies have not started doing their sums due to the absence of a new government.
The central bank estimates that if the new government is formed in the third quarter, GDP growth will be less than 3 per cent this year. In the worst case, if the new government is formed in the final quarter, the economy will expand by between 2 per cent and 3 per cent.
Speaking at the same seminar, Supavud Saicheua, managing director for the research department at Phatra Securities, expects economic growth of 2.8 per cent this year.
This is based on likely flat growth or 0.1-per-cent expansion in the first half in light of probable delayed budget disbursement for the 2014 fiscal year and delayed budgeting for the 2015 fiscal year, which could lead to discontinuity.
The first-half economy is expected to contract, due mainly to the ongoing political conflict, said Rangsit University deputy rector Anusorn Tamajai, who told the seminar that mega-infrastructure projects may not get under way for between 12 and 18 months because of political instability.
Roong said the private sector and commercial banks presently all had sound financial status and were ready for additional investment if the political situation returned into normal and consumption –particularly for non-durable goods and consumer products – staged a rapid recovery.
Consumption of non-durable and consumer goods accounts for 75 per cent of overall consumption, excluding automobiles and houses.
Purchasing power intact
“The consumption slowdown results from a lack of confidence, not from a lack of purchasing power. If the [political] problem ends soon, consumption will make a quick recovery – within two months,” said Don.
Tourism, meanwhile, is expected to stage a quick recovery as most foreign visitors are Asians, who normally plan short-term touring.
She added that that given local risks, Thailand’s policy interest rate was on a downward trend in order to prop up expansion. In the long term, interest rates will likely move in line with those in other countries.
This year’s deposit mobilisation will be less than last year’s level, given the slowdown in credit expansion, she said, explaining that commercial banks are currently not competing intensively on deposits, which in turn means low interest rates.
“Household debt, which could rise among low-income earners and farmers who are [currently] not earning anything from the rice-pledging scheme, needs to be watched.
“While household debt has shown signs of rising following higher expenses from increased debt and higher interest expenses, it is not however at a dangerous level,” said the spokeswoman.
“In regard to capital movements after new US Federal Reserve chief Janet Yellen said she would continue the existing overall policy, Roong said she believed believed US monetary policy would remain unchanged – although the money markets may take gradual adjustments.
Previously, capital flew out of emerging markets, as had been projected. During developed countries’ ongoing quantitative-easing programmes, there was an influx of capital into emerging countries that went beyond those nations’ fundamentals, and it was therefore normal for a large amount of capital to flow out once those programmes were eased, she said.