Nonarit Bisonyabut, TDRI urges speedy action to boost economy



Nonarit Bisonyabut, TDRI predicts that the economy will remain in the doldrums this year and urges the government to speed up public investment and launch measures to help low-income earners and restore investor confidence.

The think tank estimates that GDP will come in at 2.75-3.25% this year, said research fellow Nonarit Bisonyabut, adding that almost all growth drivers remain lukewarm.

Thailand is facing dismal exports, spiralling household debt, tepid consumption and private investment, and falling farm product prices.

Downside risks to economic growth are looming large, given the worse-than-expected shipments, unpredictable factors such as Greece’s debt crisis that could cause it to exit the euro zone, China’s stock market slump and the worst drought in a decade.

“It will be another year for the economy to see growth lower than its potential. The growth this year could be attributed to our luck in having low base growth last year of a mere 0.7%. We can call it growth from a low base effect rather than a real economic rebound, ” Dr. Nonarit said.

Thailand’s growth potential is 4-5%.

The main engine for economic growth is public investment and much depends on whether state budget disbursement can reach its target and if the government has additional measures to help farmers.

The government should urgently launch measures to aid farmers suffering from low product prices and the drought, but the measures must directly reach the targeted group and not be blanket measures as has happened in the past, Dr. Nonarit said.

“The situation in the agricultural sector is the most worrying,” he said.

Even though the tourism sector’s recovery is revving up, its size is too small to offset the large problems in other sectors, he said. Tourism makes up less than 10% of Thailand’s GDP.

Dr. Nonarit said the economy would bounce back gradually in 2016 as most of the debt incurred from the Yingluck Shinawatra administration’s tax rebate scheme for first-time car buyers would be paid off and there would be major investment in infrastructure projects.

However, whether the infrastructure developments will be able to attract investment from the private sector or benefit from a crowding-in effect will dictate the economic trend next year.

Kasikorn Research Center (KResearch) is maintaining its forecast for Thailand’s GDP growth rate for this year at 2.8%, mainly supported by tourism and fiscal budget disbursement.

It has revised up its growth forecast for foreign tourists visiting Thailand to 16% from 10% but cut its projections for exports to a 1.7% contraction from zero growth, domestic consumption to 1.7% from 2% and private investment to 2.8% from 4.5%.

Amid the fragile economic circumstances, a third policy rate cut by another 25 basis points this year is possible. The benchmark rate stands at 1.5%.

The additional external headwinds including the problems of China, Greece, Malaysia and Indonesia will play a greater role in decisions on the policy rate than the US Federal Reserve’s rate reversal, Dr. Nonarit said.

The problems in Malaysia and Indonesia are weakening their currencies but would not weigh down other currencies in the region, he said.

KResearch has revised its forecast for the baht to 34.5 a dollar at the end of this year from 34 predicted previously.

The baht yesterday was at 33.96/98 against the dollar, bouncing back slightly after sinking to a six-year low on Wednesday below the 34-level due largely to the greenback’s strength on risk aversion from China’s stock market slump.

One Asset Management chief executive Win Udomrachtavanich believes the Thai economy will struggle to meet its targets if the government remains slow in launching its infrastructure project investment in the next few months at a time when all growth engines such as exports and farm product prices are slowing down.

Thailand is now also suffering from unexpected factors such as the weaker baht and severe drought.

Another problem facing Thailand’s export sector is expensive labour costs resulting in higher production costs.

That might have persuaded some companies to move to neighbouring countries and pay lower wages.

“If the government takes quicker action on investment projects, domestic consumption will be better as well as purchasing power, supporting listed firms’ earnings to grow as the market expects and improving the economy,” Mr Win said.

Based on the current situation, One Asset expects the SET index in the second half will move in a range of 1,450 to 1,550 points. But if the government can speed up its infrastructure projects and the 4G auction can be arranged on time, the SET index will rise significantly.

“We seriously need to make a quick move to boost the economy before the US Federal Reserve decides to hike interest rates, otherwise foreign funds will flow out to the US and other countries,” Mr Win said.


First published in Bangkok Post, 10 July 2015