Today: October 2, 2016, 12:19 am

Thailand ecomony is forecast to grow at 4.3% in 2014
Thailand Business Forecast Report Q1 2014 - a new country guide report on 2014-03-17 07:26:02
Thailand´s real GDP growth print, which came in disappointingly weak at just 2.7% year-on-year (y-o-y) in Q313, remains generally consistent with our view that cooling external demand will continue to weigh on headline growth over the coming quarters. However, we see increasing risks that political tensions could further dampen investor sentiment and economic activity as we head into 2014.

Subsequently, we have downgraded our 2013 real GDP growth forecast from 4.0% to 3.6%, and we expect growth to remain subdued at 4.3% in 2014.

We view the Bank of Thailand (BoT)´s decision to lower its policy rate to 2.25% in November as a means to counter the recent spate of weak economic data rather than a move to bolster confidence amid rising political tensions. Although lower interest rates should help to bolster business investment at the margin, we expect moderating regional growth over the coming quarters to remain the main theme for Thailand´s economic outlook in 2014.

We view the expansion of rice and rubber subsidies as a major setback for government efforts to fix the country´s fiscal imbalances.

We forecast the government to achieve a balanced budget only by around 2018-2019 (compared to the government´s target of 2017), notwithstanding new policies that will substantially raise subsidies over the coming years.

We have revised our policy rate forecast for 2014 from 2.50% to 2.25% to reflect the latest rate cut implemented by the Bank of Thailand on November 27. We maintain our stable outlook for monetary policy in 2014.

Downside Growth Risks From Deteriorating Fiscal Position:

In the event of a substantial decline in rice prices over the coming months, we could see the government suffering massive losses as a result of its rice policy. This could weigh on the government´s ability to finance large-scale investment projects, resulting in project delays and putting downward pressure on economic growth.

Upside Long-Term Growth Risks From Political Reconciliation:

Political uncertainties have resulted in depressed foreign direct investment in the economy. However, reconciliation efforts and economic reforms to distribute wealth more equally among the population could eventually help to bridge the political divide in Thailand. This would provide a significant boost to investor sentiment and pave the way for a surge in foreign direct investment inflows and robust economic growth.

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