BANGKOK: Thailand's economic growth may be slightly lower than previously expected this year due to delays in government spending, minutes from the central bank's last meeting showed on Wednesday.
But the minutes also noted that "private investment and exports should lend greater support to growth in the following year."
The monetary policy committee (MPC) voted unanimously on Aug. 6 to keep the one-day repurchase rate unchanged at 2.0 percent for a third straight meeting, saying the policies of the new military government would boost economic activity.
In June, the central bank forecast economic growth of 1.5 percent for 2014, sharply lower than the 2.7 percent expected earlier.
It has forecast economic growth of 5.5 percent for 2015.
The army took power on May 22 to end months of political unrest, which hurt economic activity and disrupted public spending.
Data on Monday showed Thailand avoided a recession in the second quarter as the army's move to defuse tensions helped shore up consumer confidence, though doubts remain about whether the economy will recover as strongly as policymakers expect.
While government spending, consumer demand and agriculture have picked up, manufacturing, private investment, exports and tourism remain weak. And, though the military government has vowed to fast track major infrastructure projects, the full benefits of such spending many not be seen until 2015.
Santitarn Sathirathai, an economist with Credit Suisse in Singapore, said on Monday that Thailand would need to expand at nearly 9 percent in the second half to meet the central bank's 1.5 percent full-year growth forecast.
"That's quite a demanding number especially when you don't have that many strong, positive catalysts this year."
Government spending, which ground to a halt during the paralysing political crisis, "will eventually come through and help but it will probably take time," he said. "Although many public investments plans are already under way, including the junta's approval of the double-tracking of railway lines and the general scope of a 2.4 trillion baht ($75 billion) infrastructure plan, more needs to be done," HSBC said in a research report on Tuesday.
"The government may need to speed up public investment approvals to ensure adequate growth support, especially while private investment remains weak, partly reflecting low capacity utilisation and weak export growth," it said.
The minutes also said that much-needed economic reforms might have short-term economic repercussions but "would lay a strong foundation for the country in the longer term."
Some MPC members believed demand would be stimulated by the government's income-generating policies, while exports would benefit from increased intra-regional trade.
But the minutes also showed that some policymakers thought continued monitoring of household debt levels was needed because the rate of new debt creation still outpaced income growth.
The Bank of Thailand's monetary policy committee has kept the policy rate at 2.0 percent since March, and many economists expect rates will remain at that level for the rest of the year as the central bank waits to see if the economy regains traction as expected.
The next policy review is on Sept. 17.
Comments
Comments are closed.