BANGKOK: Thailand's central bank said on Friday the country's pivotal exports won't grow at all this year, but maintained the economy can still grow 1.5 percent in 2014 assuming the government can jack up spending in the last quarter.
The Bank of Thailand (BOT) also cut its economic growth forecast for next year to 4.8 percent from the 5.5 percent it predicted in June.
Three months ago, the central bank projected a 3.0 percent increase in exports this year, but now it says there will be zero rise.
Exports are equal to more than 60 percent of the Thai economy, and have been weak since before political turmoil that began in late 2013. Anecdotal evidence shows that while exports are sputtering, another key growth engine – domestic consumption – is also not firing smoothly. While Bangkok street protests ended in May, when the army seized power, consumption is “rebounding only modestly”, said Bernard Aw, economist with Forecast Pte in Singapore.
The Thai economy contracted 0.1 percent in the first half, from a year earlier, and some economists don't see where growth will come from in the second half.
Consumption “still can't be a key driver of growth,” economist Pimonwan Mahujchariyawong of the Kasikorn Research Center said. “So the big hope is for government spending.”
HOPE PLACED ON SPENDING
The central bank said its new forecasts did not take into account any economic measures that government ministers will discuss ahead of presentation to the cabinet next week.
But the BOT is clearly hoping the government will be able to ramp up spending. BOT Assistant Governor Mathee Supapongse told a briefing that the central bank kept its 2014 economic growth forecast unchanged “because of the domestic economy – improved consumption and public spending, especially in the final quarter of the year, when the government is expected to speed up disbursements.” Prime Minister Prayuth Chan-ocha, the general who led the May coup to end a political stalemate, said on Tuesday the junta planned investment spending of about 100 billion baht ($3 billion) for October-December, the first quarter of the 2015 fiscal year.
The new central bank forecasts show how badly the past year has gone for the Thai economy.
Last October, before Bangkok street protests began, the BOT forecast that 2014 would see GDP growth of 4.8 percent and a 7 percent expansion in exports. Friday's cutting of the BOT's export forecast to zero came ahead of data on August export data, due on Monday, that is expected to show shipments fell for a second month on an annual basis.
On Friday, the central bank cut its forecast for 2015 export increase to 4 percent, from 6 percent earlier, citing “structural problems” in Thailand.
Southeast Asia's second-biggest economy avoided a recession in April-June but still contracted 0.1 percent in the first half from a year earlier, thanks to political unrest and poor exports.
After taking power, army leaders sought to boost the economy by getting stalled government spending going and maintaining stability to help consumption and the damaged tourism industry. The central bank said on Friday it expects 25 million foreign tourists this year, down from 25.5 million seen previously, as many countries maintained travel warnings. In 2013, there were 26.5 million arrivals.
The BOT has left the benchmark interest rate unchanged at 2 percent since March. Economists see no change for the rest of this year.
Aw of Forecast Pte said there are signs of improvement in Thailand, but they aren't strong. Last week, he cut his 2014 GDP growth forecast to 1.6 from 1.7 percent.
Pimonwan of Kasikorn Research said she intends to trim her projection to below 2 percent from 2.3 percent.