The country's economic growth is likely to be below 1% this year, while next year's forecast of 4% remains an uphill challenge given dubious global economic recovery, says Kasikorn Research Center.
The Red Line Mass Transit System is among several infrastructure projects to be pushed by the government next year. The World Bank predicts Thailand's GDP growth next year will perform better, supported by government investment and exports. APICHART JINAKUL
Despite projecting this year's economic growth at 1.2%, there is a possibility that the full-year growth rate might come in lower than 1% because of sluggish exports and lacklustre domestic consumption, said Charl Kengchon, the think tank's managing director.
Economic growth in the final quarter is projected at 4% with domestic consumption and exports viewed as growth momentum drivers before year-end, he said.
Finance Minister Sommai Phasee has admitted the economy is likely to grow by less than 1% this year due largely to tepid exports and delays in public spending. Earlier, Deputy Prime Minister MR Pridiyathorn Devakula forecast fourth-quarter growth at 2.5% to 3%, which would mean full-year GDP of less than 1%.
Kasikorn Research Center forecasts exports to contract by 0.1% this year, while base case figures for economic growth and exports in 2015 are projected at 4% and 3.5%, respectively.
"What we are most concerned about is next year's growth figure since 4% is challenging and it is still uncertain whether we can achieve that growth rate," said Mr Charl.
The National Economic and Social Development Board slashed its economic growth forecast this year to 1% following the third quarter's tepid GDP growth at 0.6% year-on-year, while predicting a growth ratio between 3.5-4.5% in 2015.
As inflation currently remains low, the Bank of Thailand's Monetary Policy Committee (MPC) could cut its policy rate by 25 basis points at this year's final meeting scheduled on Wednesday as there are a lot of downside risks to next year's growth, said Mr Charl.
"Inflation and economic growth in a forward-looking view could be lower than expected, so it might be an appropriate time for the committee to lower the benchmark interest rate because nothing can be done further if the US Federal Reserve raises its fed funds rate," he said.
He said the MPC's rate cut dilemma is that the baht could be affected by volatility in global fund flows coming from the Fed's rate hike, while the swelling household debt and property price bubbles are other risks associated with a rate-cut scenario.
Kangana Chockpisansin, head of the centre's macroeconomic research unit, said the Fed is expected to raise its fed funds rate once the US unemployment rate falls to 5.5% as opposed to a rate hike decision triggered by the US economic growth data.
Separately, Thailand's economic growth next year would be mainly driven by domestic consumption, public investment, government budget disbursement and private investment, she said.