THE INTERNATIONAL Monetary Fund has revised down this year's forecast for Thai economic growth to 2.5 per cent from the 5.2 per cent estimated previously, mainly because of the political uncertainty. This would be the lowest growth rate among Asean nation
“The near-term outlook remains clouded by the political situation; the economy is slowing as private demand weakens and public investment plans are delayed,” said the IMF’s April publication “World Economic Outlook: Recovery Strengthens, Remains Uneven”.
The IMF’s downward revision for Thailand followed that of the World Bank, which now puts this year’s growth in gross domestic product at 3 per cent, and domestic agencies such as the Bank of Thailand with 2.7 per cent and the Finance Ministry’s Fiscal Policy Office with 2.6 per cent. Private research houses have cut their forecasts to a range of between 1 and 2 per cent.
IMF’s 2014 GDP growth forecast for Asia as a whole is 5.5 per cent, against 5.2 per cent last year. The forecast for Malaysia is 5.2 per cent, Indonesia 5.4 per cent, Vietnam 5.6 per cent and the Philippines 6.5 per cent.
The IMF said in the report that Indonesia’s growth was projected to slow this year as subdued investor sentiment and higher borrowing costs weighed on the domestic economy, although the currency depreciation since mid-2013 should give exports a lift. Malaysia and the Philippines, however, were on a more positive trajectory, and growth was expected to remain robust in both countries.
For developing Asia, the economic outlook is largely for continued solid growth with some additional benefit from the recovery in world trade.
The IMF said concerns linked to the external environment remained, but Asia was also facing various idiosyncratic domestic risks stemming from political tensions and uncertainties in several countries including Thailand.
“As growth in the United States improves, Asia will have to adapt to a steady increase in the global term premium. Economics with weaker fundamentals and greater reliance on global finance and trade would be most affected,” the IMF paper said.
Japanese stimulus cited
Olivier Blanchard, economic counsellor for the IMF, said in the briefing that in Japan, where the organisation forecast 1.4-per-cent growth this year, fiscal stimulus had played a large role.
According to the IMF report, “Slower growth could have significant negative spill-overs for economics with strong trade and foreign-direct-investment linkages with Japan, such as Indonesia and Thailand – especially if the risk of deflation returns.”
Blanchard said emerging and developing economies would continue to have strong growth, lower than before the US-led global crisis but high nevertheless. The IMF forecasts their growth at 4.9 per cent, slightly up from 4.7 per cent in 2013. China’s GDP growth would be 7.5 per cent and India’s 5.4 per cent.
In China, there are sharper-than-envisaged vulnerabilities, for instance from the implementation of structural reform. This would have significant spill-overs for the rest of the region, especially in economies linked to the regional supply chain and commodity exporters.
In addition to tackling near-term vulnerabilities, Asia should also enhance medium-term prospects, the Fund said. Generally, reforms should focus on removing structural impediments to growth.
The world growth rate is expected to be 3.6 per cent this year and 3.9 per cent next year, up from 3.3 per cent in 2013, thanks to a strengthening recovery, Blanchard said.
He said the recovery appeared strongest in the United States, forecast at 2.8 per cent in 2014. It is also strong in Britain, at 2.9 per cent, and in Germany at 1.7 per cent, though some imbalances persist.