Despite the quick recovery expected by many forecasters, some economists remain doubtful if Thailand's growth will be as fast as people hope, as internal and external problems remain unsolved.
A shopper chooses organic produce yesterday from a booth at the Organic and Natural Expo 2014. Despite the slow economy, consumers are more selective in choosing produce of good quality. The fair, organised by the Commerce Ministry, will run until Sunday at the Queen Sirikit National Convention Center in Bangkok. PAWAT LAOPAISARNTAKSIN
After the political turning point of the May 22 coup, many forecasters revised up growth projections on expectations the military junta would quickly impose short-term remedies to improve domestic consumption and regain foreign investors' confidence.
However, Siam Commercial Bank’s Economic Intelligence Center (EIC) maintains a 2014 economic growth rate of 1.6%. GDP contracted by 0.6% in the first quarter, and the EIC estimates it will contract 0.2% in the second quarter.
This brighter economic outlook is not without risks, however, as exports in particular have underperformed this year apart from the damage caused by political turmoil, said chief economist Sutapa Amornvivat.
For the first five months of the year, exports contracted 1.2%, while the EIC forecasts full-year export growth of 1.1%.
The research house revised down its earlier export growth projection of 4%, as there are no clear recovery signs despite the improving global economy.
Mrs Sutapa said Thailand needed export restructuring if it wanted to boost annual export growth to double digits.
The export structure needs to seek strategic industries instead of relying largely on the automotive industry, which represents 11% of export volume but has shown slower growth.
Electrical appliances and electronic parts have faced outdated technology in the supply chain while global demand has been declining.
The export volume of such products dropped 1.4% in the first five months.
Export products should move to modern technology in line with global market demand. Meanwhile, existing technology is still sufficient for emerging markets such as Cambodia, Laos, Myanmar and Vietnam, Mrs Sutapa said.
Thailand’s exports to the Asean market represent 25% of total exports.
"In light of weakening competitiveness, we should develop the country’s export structure, setting a clear direction for exports in the long run to maintain growth. If not, we may not see double-digit growth after booking single-digit growth for two years," Mrs Sutapa said.
Rising household debt remains a major pressure that may slow the pace of recovery over the next six months, said a survey by the University of the Thai Chamber of Commerce.
Household debt rose to a record high of 82.3% of GDP last year against 77.3% in 2012. The survey showed the amount of debt per household had risen by 16% from 2013 to average 219,158 baht.
More than half of respondents said their debt was loans from financial institutions, while 49% borrowed from non-system sources or loan sharks, said Thanavath Phonvichai, vice-president for research.
"This is the highest rise in a one-year term since our first survey in 2006, when we found a 14% increase," he said.
The survey's 1,200 respondents earned 5,000 to 50,000 baht per month.
Some 75% of respondents were indebted, while 83% of the indebted admitted they had problems with monthly payments.
Almost 40% of indebted respondents borrowed for daily life expenses, 17.1% from one creditor to pay loan sharks, 11% for car payments, 10% for business investment and 4.6% for buying houses.
Some 51% of respondents had no savings, while 49% were worried that their savings would be reduced by the higher cost of living.
Mr Thanavath said increasing household debt was an important factor in lowering purchasing power and slowing the economic recovery.