Bank of Thailand expects growth rebound in 2015

Bank of Thailand expects growth rebound in 2015

The Bank of Thailand forecasts economic growth will strengthen to 5.5% next year as the economic recovery gains momentum.

Mathee: Confident about next year

However, it considers EU action against Thailand to be a downside risk to this year’s revised 3% export growth projection.

The latest forecast for 2015 is raised from an earlier projection of 4.8%.

Despite projecting the economy to contract by 0.5% on an annual basis in the first half, the central bank expects stronger signs of recovery to drive growth to 3.4% in the second half, with economic activities returning to normal in 2015, said Mathee Supapongse, senior director of macroeconomic and monetary policy for the Monetary Policy Committee (MPC).

"Following the second-half recovery, the MPC assessed that next year would see a return to normal economic conditions, with domestic demand, tourism and exports driving growth," he said.

The central bank recently revised down its growth forecast this year to 1.5% from 2.7% projected in March after the protracted political unrest contributed to a first-quarter contraction of 0.6% year-on-year and 2.1% quarter-on-quarter.

Since political uncertainty has receded significantly, state spending will likely increase, as the junta is expediting budget outlays and drafting the budget for fiscal 2015, said Mr Mathee.

He said Thailand’s current account was projected to record a surplus of US$11.7 billion this year due to a decline in imports in the first half following ebbing domestic demand.

Next year’s current account is expected to register a surplus of $1.1 billion as imports increase and domestic demand normalises, Mr Mathee said.

Private consumption and investment are expected to resume on the back of restored confidence.

Export growth is projected at 3% this year, down from a projection of 4.5% in March, Mr Mathee said.

This is due to ebbing demand in the Chinese, Japanese and Asean economies, falling agricultural prices in the global market, constraints on Thailand’s technological product capacity and structural changes in global trade.

The latest export forecast does not take into account the move by the EU to reduce ties with Thailand in a protest against the May 22 military coup.

"The issue has to be monitored further as each member state of the EU will assess the matter individually, but no impact in terms of trade, investment and tourism has been seen recently," he said.

Exports are expected to grow by 6% next year, down from 6.5% projected in March.

Headline and core inflation are projected at 2.6% and 1.7% this year, respectively, on the back of rising domestic demand and the pass-through cost of higher liquefied petroleum gas prices to food.

For 2015, headline inflation is expected at 2.5% and core inflation at 1.4%.

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