April 09, 2014 00:00 By Nakarin Srilert, Erich Prapar
The National Economic and Social Development Board (NESDB) has cut its forecast for this year's economic growth to 3-4 per cent, and export growth may be lower than the 5-per-cent target after no signs of economic recovery in January and February, given
Speaking at a seminar on “Impact from the Political Crisis on the Thai Economy” yesterday, Porametee Vimolsiri, deputy secretary-general of the NESDB, said it had revised this year’s growth forecast to 3-4 per cent from 4-5 per cent previously. The revision was made after it became unlikely that the government’s plan to invest Bt140 billion in infrastructure projects for transport and water management would be realised this year.
The political impacts on tourism, possible delays in government budget disbursements, and likely declines in investor and consumer confidence are factored into the revised estimate, Porametee said.
During January and February, exports rose 0.2 per cent in value and 2 per cent in volume. Excluding gold, exports decreased 1.9 per cent year on year in the corresponding period.
If export growth does not hit the 5-per-cent target, gross domestic product may expand by less than 3 per cent as other economic drivers, including state expenditures, private investment and private consumption, have been affected by the prolonged political impasse. He noted that other agencies had also cut their GDP growth forecasts.
“The NESDB cut its growth estimate, and it is likely to be closer to 3 per cent than 4 per cent, as no economic indicators improved in January and February. If GDP expands by less than this, employment may be affected,” he said.
Meanwhile, Thirachai Phuvanatnaranubala, a former finance minister, said the continued political conflicts had eroded the confidence of foreign investors and had affected people’s confidence in terms of consumption and spending. These have had impacts on the country’s economic stability.
Threat to jobs
There remains uncertainty on when the political conflicts will end. If it ends within the first six months of this year, economic confidence will return rapidly, Thirachai said.
“The economic problems may lead to the end of the political problems. There may be a negotiating process to prevent more damage to the nation and the economy,” he said.
Thai Bankers’ Association secretary-general Thawatchai Yongkittikul said he did not expect a new government to be formed in the first half of 2014, and if there were still no government formed in the latter half, the economy would be severely affected.
If a government budget cannot be set in time for the 2015 fiscal year, the resulting lack of public investment would be a blow to the economic system. He, therefore, urged all parties to find a solution swiftly and install a new government that will be accepted by all and geared up for national reforms as soon as possible.
“The private sector cannot wait for the state’s stimulus measures. What it should do in this situation is to focus on export markets and join forces as clusters to go into overseas markets. Africa, the Middle East and China have high business opportunities,” Thawatchai said.
Kirida Bhaopichitr, senior economist at the World Bank’s Bangkok office, said the Thai economy was expected to expand by 3 per cent, driven by the global economic recovery, likely declines in oil prices, the country’s low interest and inflation rates, and reduction of personal-income-tax rates.
Thailand may gain from foreign direct investment, about 50 per cent of which is expected to flow into Asean, she said.
However, if Thailand sees prolonged political problems without the formation of a new government, the nation’s GDP may decline because of lower economic confidence, she said.
Meanwhile, the Federation of Thai Industries worries that if the Kingdom’s credit rating falls, the cost of borrowing will be higher than that of competitors and might even lower GDP growth below 1 per cent this year, FTI vice chairman Vallop Vitanakorn warned.
He said the best way to prevent a rating downgrade was for the parties in the conflict to negotiate and allow the country to return to a normal political situation as soon as possible. He said the political conflict was the only risk to the sovereign credit rating.