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Bank of Thailand Lowers Thai Economic Growth Projections

29 December 2014 (Readers 843)
As the Thai economy is expected to recover steadily but at a slower pace than previously forecast, the Bank of Thailand has lowered economic growth projections for both 2014 and 2015.

The Assistant Governor of the Bank of Thailand and Secretary of the Monetary Policy Committee, Mr. Mathee Supapongse, released the December 2014 issue of the Monetary Policy Report, with an assessment of Thailands economic outlook.

In the report, the Thai economy in 2014 is expected to grow by 0.8 percent, against 1.5 percent predicted earlier. In 2015, it is likely to expand by 4 percent, against 4.8 percent forecast previously. The report cites a weaker outlook for both domestic demand and exports as factors for the slow growth.

On the domestic side, consumption is expected to recover gradually on the back of improving nonfarm income and employment, as well as lower oil prices. However, durable consumption, especially automobile purchases, is still impeded by high household debt and depressed farm income. In addition, government spending, particularly on investment projects, is likely to be lower than previously anticipated. This change is due to project reviews and examinations of transparency issues, implementation capacity that does not expand fast enough to meet increased budgets, and labor scarcity in the construction sector.

The prospect of a public investment shortfall and the slow recovery of domestic demand in turn have weighed on the investment decisions of most private businesses. An exception is the telecommunication industry, which ramped up investment in the second half of 2014 to meet increasing demand for hi-speed Internet and 3G networks.

On the external side, merchandise exports are likely to grow at a lower rate because of weaker demand from trading partners. Notwithstanding steady growth in the United States, the lower-than-expected growth of the Eurozone economies, Japan, and China has caused exports of Asia and Thailand to slow.

According to the report, domestic production limitations and depressed commodity prices would continue to affect Thai exports in the period ahead. Concerning exports of services, the rebound of Chinese tourists, whose confidence in Thailands political situation resumed quickly, has contributed to a steady recovery. Tourism will also receive additional benefit from lower fuel prices in the period ahead. Nevertheless, the recovery will be restrained by European and Russian tourists, owing to their weak economies, and the fact that some tourists remain concerned about the Thai political situation.

Inflation declined considerably, mainly because of lower cost pressure. The global oil price has decreased substantially and is expected to stay low throughout the forecast period. The low global oil price will push Thai inflation lower for quite some time, continuing the downward trend it has been on since late 2014.

However, the government policy on retail energy price restructuring and a weaker Thai baht have offset the impact of the global oil price on inflation to some extent.

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