Mathee: Economy will recover gradually but downside risks remain fairly high.
Reuters/Bangkok
Thailand’s central bank cut its 2015 economic growth forecast for the third time this year as the economy continues to struggle more than a year after an army coup ended political unrest but says it hopes government measures will lend support.
The Bank of Thailand (BoT) downgraded its growth estimate this year to 2.7% from 3% forecast three months ago, about half the rate it expected a year ago.
It also cut its 2016 economic growth forecast to 3.7% after hiking it to 4.1% in June. The BoT now expects exports, a key economic driver, to tumble 5% this year, which will push the country’s exports into negative terrain for the third year running.
“The main reason for the downgrades is still external factors, especially exports. The economy will recover gradually but downside risks remain fairly high,” BoT Assistant Governor Mathee Supapongse told a news conference.
The BoT cut its 2016 export growth forecast to 1.2% from 2.5% as seen in June.
Charnon Boonnuch, economist of Tisco Securities, said the BoT’s big cut in its export projection was “surprising” as trade should improve in the fourth-quarter. The BoT’s previous forecast was for a fall of 1.5%.
Although the coup restored some stability, the junta has been unable to put Southeast Asia’s second-largest economy back on a recovery track as exports and consumption remain stubbornly weak. Growth last year was 0.9%.
In its efforts to lift growth, the junta this month unveiled economic measures to help small firms and rural areas.
But Mathee said the stimulus would largely benefit the economy next year and may add just 0.1 percentage point to 2015 growth. The central bank, which announces economic forecasts every three months, said it expects faster growth in the second half. On quarter, the economy grew 0.4% in the second-quarter and 0.3% in the first-quarter.
This week, the Asian Development Bank also lowered its 2015 growth estimate for Thailand to 2.7% from 3.2%. ADB economist Luxmon Attapich said yesterday growth next year will hinge on village funds being distributed to the rural community and public investment taking off.
Last week, the BoT left the benchmark rate steady at 1.50% after two surprise cuts this year, letting a weak baht and stimulus measures help growth.
It next reviews policy on November 4, and most economists expect no change this year amid benign inflation.
The BoT expects annual headline consumer prices to fall 0.9% this year versus a drop of 0.5% forecast earlier.
