The Bank of Thailand has again lowered its economic growth forecasts to a mere 0.8% this year and 4% next year in anticipation of slower-than-expected government spending, lukewarm private consumption and weak export growth.
Customers order cooked food from a street vendor in the RCA area on Rama IX Road. Economic forecast underscores the sluggish economy this year, but the government is confident economic growth will bounce back next year. SEKSAN ROJJANAMETAKUN
The full-year economic growth forecast of 0.8% was based on assumptions that fourth-quarter GDP would grow by 2.7% year-on-year and full-year export growth would contract by 0.5%.
If the 2014 economic growth forecast comes true, it will be the country's lowest growth since the devastating floods in 2011, when growth sank to 0.1%.
The central bank had earlier predicted 1.5% for this year's GDP growth and 4.8% for next year's.
Mathee Supapongse, a central bank assistant governor and secretary of the Monetary Policy Committee (MPC), said economic growth next year could be boosted by faster government spending, rapid recovery of private investment and a slump in oil prices supporting private consumption.
A slower-than-expected global economic recovery and declining consumption resulting from lower incomes of farmers are considered downside risks.
"In the coming period, relaxed monetary policy would lend support to sustain Thailand's gradual economic recovery, while investment and clarity of public policies are other factors shoring up stronger recovery," Mr Mathee said.
He said since the economy had been expanding below its potential growth rate since last year, the government must ramp up its budget disbursement for investment in order to strengthen competitiveness and enhance private investment incentives.
The economy grew by 6.5% in 2012 after rebounding from the 2011 floods. But the growth rate fell to 2.9% last year, and this year's growth prospects are dim after the protracted political unrest in the first half dented momentum and exports turned in a dismal showing.
Mr Mathee said export growth was projected at 1% next year due to the fragile global economic recovery, constrained production capacity in Thailand's technological products and continuing low farm prices.
The MPC will continue to monitor developments on clarity of the global economic recovery, public spending to meet the government's target, monetary policy stances of major economies and geopolitical problems, particularly in Russia, that could affect financial markets and global fund flows, he said.
Economic growth is expected to surpass 4% year-on-year in the first quarter of 2015, as predicted by Deputy Prime Minister MR Pridiyathorn Devakula, due to the low-base effect of a 0.5% contraction in this year's first-quarter growth, Mr Mathee said.
He said deflation was not expected to occur next year, but disinflation was possible due to low inflation, which is projected at 1.2% for both core and headline inflation.
Thailand's current account is expected to record a surplus next year at US$4.3 billion due to higher imports and moderate export growth projection coupled with slower-than-expected tourism growth, Mr Mathee said.
The upcountry economy has grown by 2.8% this year, far slower than last year's 4.5% rate due to tumbling agricultural product prices, said Manas Jamveha, director-general of the Comptroller General's Department.
However, provincial economic growth is expected to bounce back to 4.7% next year, underpinned by public investment.
The Upper South is estimated to enjoy the country's strongest growth of 6.5% next year, while the Lower South could experience the lowest growth, between 2.1% and 3.1%. The economic value of 76 provinces excluding Bangkok amounts to 8.5 trillion baht or 70% of GDP.
The provincial economy has grown at a faster clip than Bangkok's economy over the past decade thanks to booming cross-border trade and public investment in transport and flood prevention systems.
Cross-border trade is valued at an estimated 950 billion baht this year, reaching 1 trillion in the next two years thanks to growing trade with Cambodia, Laos, Myanmar and Vietnam.
Exports to those countries represent 8% of this year's overall value, increasing to an estimated 11% next year.