February 28, 2014 00:00 By Nakarin Srilert
Despite the prolonged political pressure on domestic consumption, the economy could still spring ahead this year, thanks to the country's high foreign reserves, strong financial institutions and manageable public debt, according to the Thailand Future Fou
Executive chairman Sethaput Suthiwart-Narueput said yesterday that growth in gross domestic product would come in lower than expected, but would not stay in negative territory or be flat.
While domestic consumption might decline, exports could make more headway as the global economy recovers, he said.
The country still enjoys sound economic fundamentals. There is no sign of a rerun of the 1997 financial crisis, as the ratio of non-performing loans (NPLs) remains lower than at that time.
However, the impact of the political chaos on tourism and related industries must be put on close watch, he said. About 20 per cent of the labour force is involved in tourism-related industries such the hotel, travel, restaurant and airline industries. This is second only to the 40 per cent in agriculture and related industries.
"What we see now is a slowdown in domestic consumption as a result of lower income of workers in the tourism and agricultural industries.
"There is concern for small hotels that borrowed for their construction. If tourist numbers continue to fall for a long period, they may face an NPL problem," he said. The next government should downsize its populist policies and allot the freed-up budgets to a broadened social-welfare plan with more inspection mechanisms.
At present, populist projects are costing too much to implement, he said. For example, the rice-pledging scheme has used up about Bt300 billion per year, which is equivalent to the government budget for investment in each fiscal year.
"Several populist projects have overspent and have requested for higher budgets. It may be very difficult to cancel or downsize each populist project if a change from the populist policy to welfare is planned, while the fiscal burden will likely continue to rise," he said.
Thailand still lacks an appraisal tool to measure how much the government spends on such projects. Every public project could set aside about 1 per cent of its budget to engage companies to spending efficiency, with the findings disclosed periodically to the general public. This method is employed in such countries as Australia, New Zealand and some in Africa. At present, only the Office of the Auditor-General scrutinises the government budget after projects are implemented, Sethaput said.
Roong Malikamas, spokeswoman for the Bank of Thailand, still believes exports will expand by 5-7 per cent this year, despite January’s 1.98-per-cent contraction to US$17.9 billion (Bt583 billion).
"January figures are generally volatile, not only in Thailand, but also other countries. For example, the weather influences the US figures. Usually, Thai exports remain $2.2 billion lower in January than the average of other months," she said.
Last year, exports totalled $228 billion, or $19 billion per month.
Exports could improve on the back of the clearer global economic recovery, she said.
"Based on statistics, the figures usually accelerate [after January].
It’s more possible for a 5-6-per-cent rise [in exports]. Don’t panic over January’s figures. We should wait for the February figures to see the two-month average," she said.
Based on a survey of business operators, there was more tightening in liquidity which was higher than that during the 2008 economic crisis, as sales or income were expected to decline during the economic slowdown.
Some capital was flowing out of the stock market, but less than has been seen previously.
There were no significant capital outflows from the bond market, and the baht has moved in line with its regional peers in the past two weeks, Roong said.