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Thailand’s Economic Growth Forecast

March 26, 2014 Destination Thailand No Comments Email Email

The Bank of Thailand has stated that economic growth in 2014 is likely to drop to 2.7 percent, against 3 percent predicted earlier.
The Assistant Governor of the Bank of Thailand for Monetary Policy Group, Mr. Paiboon Kittisrikangwan, said that the political situation remained a risk factor for the country’s economic growth.

Further political uncertainties also became evident after the Constitution Court decided to nullify the 2 February 2014 general election. It reasoned that the election violated a section of the Constitution, since no candidates stood in 28 constituencies in eight southern provinces, thus making it impossible to hold the election on the same day nationwide. The court also ordered the Election Commission of Thailand to consult with the caretaker government on the new election date.

Mr. Paiboon said that, as the formation of a new government was still unclear and domestic consumption remained weak, this situation would affect the confidence of both local and international investors. As a result, public investment was expected to grow by only 2.5 percent.

The Bank of Thailand believed that the political turmoil would ease in the middle of the year and that private consumption and the investment situation would improve. Exports are likely to grow by 4.5 percent, in line with the recovery of the global economy. As for 2015, the Thai economy is expected to grow by 4.5 percent.

Meanwhile, Governor of the Bank of Thailand Prasarn Trairatvorakul said growth of 2.9 percent in 2013 disappointed many, as most analysts had expected 4 or 5 percent range of growth. In his statement at the Japanese Chamber of Commerce Dinner Talk on 20 March 2014 in Bangkok, Mr. Prasarn pointed out that tourism performed well and contributed significantly to the 2013 economic growth. As the political deadlock persists, however, tourism has recently begun to feel an impact as well. Economic activity continued to be soft in January 2014, despite signs of recovery in some export sectors.

However, he said that there are also causes for optimism. The world economy is strengthening and is set to grow at a more robust pace in 2014. The International Monetary Fund (IMF) projected global growth to be 3.7 percent in 2014, up from 3 percent in 2013. Brighter global prospects should lend some support to exporting economies, such as Thailand.

Mr. Prasarn explained that the Thai economy also derives its strengths from within. Underlying fundamentals that have been attracting long-term foreign capital to Thailand over past decades remain intact. The young labor force is skilled and offers value relative to other parts of the region. Good infrastructure and business-friendly regulations continue to make Thailand an attractive manufacturing hub for international investors. Thailand’s financial system is sound and robust, with banks’ balance sheets strong enough to withstand severe economic shocks.

He quoted Moody’s as saying “Thailand’s credit fundamentals are strong enough to withstand political crisis.”

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