March 20, 2014 00:00 By ERICH PARPART,
THE FINANCE MINISTRY'S Fiscal Policy Office is likely to cut its 2014 economic-growth forecast for a second time - this time to below 3.1 per cent - after witnessing an 18-per-cent month-on-month contraction in tourist arrivals in February.
Meanwhile, the political turmoil has led the National Institute of Development Administration (NIDA) to predict that gross domestic product will expand by below 3 per cent this year in its “baseline scenario”, with the second half expected to be better than the first.
At the beginning of the year, the Fiscal Policy Office revised down its GDP growth estimate for 2014 from 4 per cent to 3.1 per cent.
Deputy director-general Krisada Chinavicharana yesterday said the office was closely watching the domestic tourism situation, as the overall number of tourists would affect the country’s economic growth.
Tourist arrivals at Suvarnabhumi Airport in February fell 18 per cent from the January level.
“If the political conflict is prolonged yet further, the number of tourist arrivals may fall by as many as 3 million,” he said.
According to the Tourism and Sports Ministry’s original target, the country this year is expected to record 30.27 million tourist arrivals, up 13.29 per cent from last year, with an estimated income of Bt1.34 trillion, up 15 per cent.
Income from tourism accounts for 11 per cent of GDP.
As for the export sector, the Fiscal Policy Office expects the value of shipments to grow by 6.5 per cent from last year, said Krisada.
However, he warned that if political instability did not improve, export growth was not on target and consumption and investment slowed, economic growth this year could come in below 2 per cent.
The office previously commented that if a new government could not be formed by the end of July, the delay could impact on the country’s budgetary process, under which disbursement for the next fiscal year begins in October.
This would result in a nosedive in the last quarter’s GDP, the agency warned.
Meanwhile, NIDA believes the economic situation in the second half will be better than in the first six months, due to an expected increase in exports amid a global economic recovery, a lessening of political tension due to fewer protest sites and the lifting of the state of emergency, an expected increase in investment in the third quarter, and the belief that a permanent government will be in place by the end of July.
“The lower number of protest sites and the lifting of the emergency decree will increase domestic consumption in the second quarter, and domestic investment will follow in the third,” said Asst Professor Yuthana Sethapramote from NIDA’s School of Development Economics.
He said exports would be the main factor driving the economy, but reduced political tension would also boost domestic consumption and investment, which made the second half look much more promising.
Another positive factor in what is NIDA’s baseline scenario is the next government’s budget disbursement in October, along with investments due to the approval of projects by the Board of Investment.
The institute has four scenarios overall, with a GDP forecast for each.
For the baseline scenario, where there is a permanent government in place and the political situation begins to be resolved by the third quarter, it expects GDP to grow by 1.4 per cent by the first half and 3.8 in the second half – resulting in average growth of 2.6 per cent for the full year.
This scenario also has goods exports expanding by 5 per cent, and domestic consumption and private investment by 1.8 per cent and 1 per cent, respectively.
In its “bad scenario”, where the political crisis has prolonged into the second half of the year and there is still no permanent government, NIDA expects full-year GDP to grow by 1.9 per cent.
Private consumption is forecast to grow by 0.7 per cent, while private investment will shrink by 2.9 per cent. Export growth remains at 5 per cent.
For what NIDA calls the “double-bad scenario” – where the political turbulence is prolonged into the second half, along with external pressure such as a sluggish global economic recovery and the Ukraine crisis starting to effect global economy – NIDA expects Thai GDP to grow by 1.4 per cent and exports to expand by just 3.7 per cent.
Domestic consumption is forecast to grow by 0.4 per cent, with investment contracting by 3.9 per cent.
Under its “good scenario”, NIDA expects economic growth of 3.1 per cent if the political situation is resolved by the second half and the global economic recovery is better than expected.
This scenario sees exports of goods and services and revenue from tourism growing by 6.6 per cent, while domestic consumption and investment will expand by 2.1 per cent and 1.6 per cent, respectively.