NESDB slashes 2013 growth to 3%

NESDB slashes 2013 growth to 3%

Quarterly 2.7% growth worse than expected

The government has cut its growth forecast for this year after the economy in the third quarter expanded at a slower pace due mainly to weakening exports and shrinking consumption and investment.

Gross domestic product (GDP) increased by 2.7% year-on-year in the third quarter, down from 2.9% in the previous quarter and 5.4% in the first quarter.

The slow growth was attributed mainly to deceleration both in non-farm and farm sectors, while household consumption and investment also decreased during the period, the National Economic and Social Development Board (NESDB) reported yesterday.

Tourism-related services sectors such as hotels and restaurants, as well as transportation, managed to expand. The communication sector also grew, driven by 3G services.

The third-quarter figure ended the technical recession as GDP increased by 1.3% compared to the flat growth in the second quarter and a 1.6% contraction in the first quarter.

For the first nine months of the year, GDP grew by 3.7% over the same period last year, prompting the NESDB to lower its 2013 full-year growth estimate to 3% from a range of 3.8% to 4.3% predicted in August.

The planning agency also projected flat export growth this year from, a down from a 5% forecast, citing slow economic recovery in the US and European Union, as well as Japan's import reduction policy.

Exports contracted for a second consecutive quarter to 1.8% year-on-year in the third quarter from 6.4% in the second quarter and 0.5% in the first quarter.

For the first nine months of the year, exports rose by a mere 0.2% year-on-year.

Arkhom Termpittayapaisith, the NESDB's secretary-general, said the economy may grow in a range of 4-5% next year, boosted by the improving world economy, while export growth is forecast at 7%.

"The government's planned 2-trillion-baht infrastructure investment plan is crucial for the economy next year, as the projects can help stimulate private investment and economic growth next year," he said.

Deputy Prime Minister Kittiratt Na-Ranong admitted yesterday the country's economy in the first nine months was disappointing.

"One of the factors behind the disappointing GDP data is the delay in public investment in projects such as water management," Mr Kittiratt, who is also finance minister, said at a seminar hosted by the Economic Reporters Association yesterday.

The government's 350-billion-baht water management projects have been stalled after the court has required the government to conduct public hearings before going ahead with the planned investment.

However, he hopes the infrastructure investment will help push up growth to 4.5% annually throughout the seven-year plan through 2020.

Thailand needs to beef up competitiveness through large-scale projects. A better infrastructure system can reduce logistic costs from a relatively high level of 1.4 trillion baht a year on average, he said.

Mr Kittiratt reiterated the infrastructure development will not push public debt beyond the Finance Ministry's self-set goal at 50% of GDP and said the public debt-to-GDP ratio will likely go down in 2020 due to economic growth.

Public debt is now 44% of GDP. Excluding the Financial Institutions Development Fund's debts incurred during the 1997 financial meltdown, it would be 36%.

The Finance Ministry has already transferred the rescue fund's debt burden to the Bank of Thailand.

He said that current policy interest rate and foreign exchange rates are at appropriate levels and could accommodate economic growth next year, though the policy rate could have been lower.

Commerce Minister Niwatthamrong Boonsongpaisan estimated that exports would grow by 1% this year and 5-7% next year.

Kampon Adireksombat, head of the Tisco Economic Strategy Unit, said the third-quarter data were fairly weak due to falling domestic consumption, private investment, public spending and exports.

However, his research house maintained its 2013 economic growth forecast at 3.5%, while an impact from political protests on the economy would be limited.

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