The Bank of Thailand and the Asian Development Bank (ADB) yesterday cut their Thai economic growth forecasts for this year and next.
The gloomier outlook came despite the recent launch of stimulus measures, reinforcing signs that a strong recovery remains elusive.
The central bank lowered its full-year GDP growth projection to 2.7% from 3%, citing shrinking exports, ebbing private investment and weaker-than-expected private consumption.
“The government’s stimulus measures could induce some effects this year, but the major impact is likely to materialise next year and we still don’t know whether private spending will sustain its pace,” said Mathee Supapongse, the central bank’s assistant governor for the monetary policy group and secretary of the Monetary Policy Committee.
According to the Bank of Thailand’s analysis, the stimulus measures to aid low-income earners will add a mere 0.1% to GDP during the effective period.
Village Funds historically have not achieved a 100% disbursement rate, Mr Mathee said, adding that some recipients may use the provided cash to pay debts or boost savings.
And while the stimulus for grassroots people could support private consumption to a certain degree, consumer spending remains muted by low farm income, the lingering drought and ballooning household debt, the central bank official said.
Earlier this month, the cabinet approved 136 billion baht for three stimulus measures: seven-year term loans to 59,000 Village Funds at 1 million baht each, a disbursement of 5 million baht each to 7,255 tambons to carry out repair projects, and accelerated disbursement by state agencies for small projects worth less than 1 million baht.
The government has voiced optimism that the stimulus measures will help achieve the Finance Ministry’s 3% GDP growth target.
Stimulus aimed at alleviating hardships faced by small and medium-sized enterprises was not factored into the central bank’s forecast, as those loan approvals have not begun yet.
“Risks to economic growth are tilted downward, due to several negative factors that induce substantial risk,” Mr Mathee said, noting that Thailand’s growth potential below 4% could be deemed a “new normal” similar to other countries’ conditions.
“We cannot tell whether the 2.7% [growth forecast] is the lowest, because the central bank’s fan chart is tilted downward,” he said.
Don Nakornthab, the Bank of Thailand’s director of macroeconomic policy, said GDP growth in the second half would come in at an estimated 2.5%, driven by the high base effect of last year’s second half.
The central bank’s new 2016 growth forecast of 3.7% is down from an earlier projection of 4.1%.
The bank expects Thai shipments to decline by 5% this year, down from the previous view of a 1.5% contraction. Exports are forecast to record 1.2% growth in 2016, down from a 2.5% rise predicted earlier.
The ADB also cut its 2015 GDP growth forecast for the country to 2.7% from 3%, blaming weak domestic demand and the economic slowdown in China and other Asian economies.
Luxmon Attapich, senior economist for the ADB’s Thailand mission, said the 2.7% revision did not factor in the government’s stimulus measures, which she termed unlikely to elevate full-year growth to 3%.
The ADB sees public investment and tourism as the main drivers for economic growth in 2016, the forecast for which has been lowered to 3.8% from 4.1%.
Downside risks to the Thai economy include the China slowdown, public spending delays and drought, Ms Luxmon said.