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Protests to hit investment, budget spending in 2014

National Economic and Social Development Board (NESDB) secretary-general Arkhom Termpittayphaisith predicts the ongoing anti-government protests will slow private-sector investment and state budget disbursements next year.

Four areas under pressure are: tourism, private-sector investment, state budget disbursements and the domestic consumer confidence index.

More foreign capital outflow is also likely following the US cut in its monetary-stimulus programme, Arkhom said.

The anticipated adverse impact of the anti-government protests on Thai economic growth in 2014 is being studied by the Finance Ministry and the Budget Office in meetings with the Centre for the Administration of Peace and Order (CAPO).

The groups will also examine the tourism industry, which accounts for over 10 per cent of Thailand's gross domestic product.

Meanwhile, tax revenue collection for the early fiscal year 2014 has fallen 2.7 per cent, while value-added tax (VAT) collection dropped 7.3 per cent.

The fiscal-year tax revenue could be lower than targeted if the political unrest is prolonged, Finance Ministry permanent secretary Rangsan Sriworasart warned.

State budget disbursements have declined by Bt62 billion, according to the Budget Office director, Somsak Chotratanasiri.

The NESDB secretary-general said the anti-government protests are seen to be affecting the Thai economy in four areas - tourism, private sector investment, state budget disbursements for fiscal year 2014, and the domestic consumer-confidence index.

The decline in private sector investments in 2013 was attributed to the strong baht early in the year, coupled with a high level of investments in 2012 following the massive floods of 2011.

Meanwhile, the expected additional US monetary stimulus cut next year could lead to more capital outflow from Thailand, resulting in a more volatile baht by this year-end.

The state's budget disbursements and investments by state enterprises - vital driving forces of the Thai economy - were sluggish in the final two months of this calendar year due to the anti-government protests. If the political unrest is prolonged, Somsak warned, domestic consumers' confidence and investments next year will be adversely affected.

The NESDB chief added that Thai economic growth of 4-5 per cent next year is possible depending on three main economic drivers:

1) Continuing public-sector investment, especially in basic infrastructure projects to reduce logistics costs, which the state must make happen to boost Thailand's competitiveness and draw foreign investors to Thailand. This is crucial to maintain Thailand's economic growth for the long-term as well.

2) Continuity in supporting/promoting Thai exports and securing new export markets; the new government must pursue this following the next general election.

3) Continuing campaigns to promote Thai tourism, which has attracted more foreign tourists each year, especially over the past two years. The tourism sector now accounts for 10 per cent of the country's GDP.

According to the Finance Ministry permanent secretary, it is likely the tax revenue target of Bt2.27 trillion will not be met in fiscal year 2014 due to the ongoing political impasse, which is affecting domestic consumer confidence and investments.

In fiscal year 2013 (which began in October 2012), the total tax revenue collected by the three departments under the Finance Ministry amounted to Bt325.53 billion, down by Bt9.1 billion, or 2.8 per cent from fiscal year 2012.

Meanwhile, the VAT collection (from consumers' consumption of goods and services) also dropped Bt4.5 billion, or 7.3 per cent. The import excise duty collected was at Bt8.8 billion, down by Bt1.6 billion, or 15 per cent.

On the other hand, tax revenue collection in December 2013 helped compensate for the other collections, which fell short of targets.

Exceeding the target was personal income tax, liquor and beer tax, dividends from profits of state enterprises, and revenues of other state agencies, such as the National Telecommunications and Broadcasting Commission and petroleum concessions.

It is important to resolve the political conflict and restore the country to normality quickly, as the current political impasse is having a negative impact on the country's tax revenue collections, the Finance Ministry's permanent secretary said.

Meanwhile, Budget Office director Somsak said his office had disbursed 93.52 per cent, or Bt2.361 trillion, of the fiscal year 2013 budget of Bt2.525 trillion.

On December 13, Bt567.28 billion, or 22.47 per cent of the state budget, had been disbursed. This is Bt62.79 billion lower when compared to the same period last year due to problems with the GFMIS procurement and hiring system of state enterprises, which must record the purchase orders, leading to lower budget disbursements from November 2013.

However, this problem has been resolved and the budget disbursements should return to normal, Somsak said.


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