'Underlying factors likely to boost economy in H2'
January 18, 2014 00:00
By Erich Parpart
Two economists agreed yesterday that the economy in the second half of 2014 would be better than in the first half if the political conflict is not prolonged, thanks to underlying positive factors that could come into play in the third and fourth quarters
Teerachai Phuwanartnaranubal, former minister of finance, and Visit Ongpipattanakul, managing director of Trinity Securities Group, attended “Future of Thai Economy 2014: Economist versus Astrologist”, a seminar sponsored by Krungthep Turakij newspaper and Sasin Graduate Institute of Business Administration of Chulalongkorn University.
Teerachai said the recovery of the global economy, especially in the United States and Europe, would boost Thailand’s economy through exports and fund inflows from monetary easing in Japan and the US.
However, Thailand’s current struggle with political turmoil, lack of government spending and the populist policies of the previous government will hamper the country’s ability to benefit fully from external factors in the first two quarters of this year, he said.
“The most worrisome is government spending. If the previous government wins the next election, it will continue with its previous policies, such as the Bt2-trillion infrastructure project and the Bt350-billion water-management project, which could boost the economy in the short term, but its citizens will be the ones that suffer in the long term because of the increase of public debt,” Teerachai said.
“The new administration should shift its concentration from government spending to private investment as the way to boost the economy in order to ease the problems of increasing household debt and the lack of cash flow in business.”
Visit said that even though the US Federal Reserve was planning to reduce its quantitative easing programme at the end of this month, the remaining cash in the system was still considerably high, while Japan’s tapering of its monetary policy was only at the halfway point, which means inflows will continue.
He said the main negative factor for the Stock Exchange of Thailand was the current political situation, which affected many industries, especially tourism. But if the situation is not prolonged, the current-account deficit can be eased by an increase in tourism in the last two quarters of the year.
Visit expects exports to be better this year because of the global economic recovery, especially the shrimp industry, which suffered last year from a disease epidemic. Another positive sign is the readiness of private investors to invest in Thailand as soon as the political problem dies down, as seen in the increasing number of projects approved by the Board of Investment before the political conflict began.
Another positive factor that could boost the economy in the last two quarters of 2014 is the high foreign reserve, currently at 46 per cent of gross domestic product, which has prevented the baht from weakening any further despite the political turmoil. High yields in the SET will continue to attract foreign investors, he said.