FPO lowers 2014 growth forecast again

FPO lowers 2014 growth forecast again

The Finance Ministry's Fiscal Policy Office (FPO) has again revised down its 2014 economic growth forecast, this time to 2.6% from 3.1%, and warned it could be lowered further if a functioning government is not installed by the third quarter.

The latest gross domestic product (GDP) forecast revision adds to signs that the political impasse is taking a deepening toll on the already-sluggish economy.

The ministry's think tank cut the GDP growth projection to 4% in early January from 5.1% predicted late last December.

Then in the second half of January, it said the economy could come in at 3.1%.

The new forecast is based on the assumption that a new, functioning government will be formed by the third quarter.

This will still result in a six-month delay in planning the fiscal-2015 budget and the absence of any economic stimulus measures through next year's first quarter, FPO director-general Somchai Sujjapongse told a press briefing yesterday.

The FPO appears to be the most pessimistic among authorities regarding the economic outlook.

The Bank of Thailand last week slashed its economic growth estimate to 2.7%.

Last month the National Economic and Social Development Board, which is the government planning agency, trimmed its projection to 3-4%.

Mr Somchai said political factors are the main risk to the country's economy and could affect Thailand's credit rating.

Should political tensions continue to drag on, credit rating agencies are likely to revise Thailand's economic outlook and downgrade credit ratings early next year, he warned.

Both Moody's Investors Service and Fitch Ratings recently expressed concern that extension of the political deadlock into the second half of this year could prompt negative ratings actions.

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