Gross domestic product growth for 2013 will not reach 3.7% as earlier projected, but it will be above 3%, Somchai Sajjapongse, director general of the Fiscal Policy Office (FPO) at the Finance Ministry, said on Thursday.
Mr Somchai attributed the lower than expected economic growth for this year to a slowdown in exports, for the National Economic and Social Development Board's earlier forecast of zero growth for the export sector, and the ongoing political turmoil.
He expected the economy to improve in 2014 on the back of the country’s strong economic fundamentals and the strong status of Thai financial institutions and low inflation and unemployment rates.
Factors that could derail economic expansion next year included the possibility that the United States would scale down its quantitative easing measure (QE3), the slow economic recovery in Europe and Japan, the delays in 2.2-trillion baht infrastructure development projects and internal political conflict, he said.
The Fiscal Policy Office and the World Bank expect lower GDP growth for 2013. (Bloomberg Photo)
The FPO chief believed the central bank’s monetary policy committee would maintain its key policy rate at 2.50% until the end of this year, but there would be an upward trend for the key rate next year.
Kirida Phaophichit, a senior economist at the World Bank's Bangkok office, said the World Bank is considering slashing its forecast for Thailand's economic growth for 2013.
She said the political instability in Thailand was not affecting domestic consumption but it may hurt the tourism sector if it escalated into violence.
"Next month, the World Bank is planning to lower its GDP growth projection for Thailand from an initial estimate of between 4.0% and 5.0%," Ms Kirida said.
"The World Bank has already revised down its full-year export growth forecast from 2.5% to 1.0% on the back of global economic slowdown."
For next year, the volatile global economy, particularly the QE3 measures and the debt ceiling in the US, will continue to be a key factor for Thailand's economy, she said.
The government will have to strengthen the efficiency of Thai businesses to boost exports in the long-run. It will have to speed up its 2.2 trillion baht infrastructure development scheme and the 3.5 billion baht water management projects to stimulate investment from the private sector, she said.
"If the 2 trillion baht infrastructure loan bill is not passed, it will hurt the country's economy and the GDP for next year might be lower than forecast at 4.0% to 5.0%," the senior economist said. "Exports are expected to grow 5% in 2014."
Finance Minister Kittiratt Na-Ranong said he was not concerned about the ongoing capital outflow because Thailand does not want hot money from overseas to come in to take profit for a short-term. That would lead to a problem of the baht's appreciation, eroding trade competitiveness of the export sector, he said.
Asked about the amount of foreign direct investment flowing back into Thailand’s capital market which was less than newly emerging markets, he said it was not a problem because Thailand has a sound trade and current account surplus.
Thailand has a large foreign reserve of US$190 billion, or 3.5 times more than short-term debt. Therefore, it is unnecessary to increase investment in foreign currencies. The country does not have a foreign currency shortage, he said.
Mr Kittiratt, also a deputy premier, said too much capital inflow could have a negative impact, but the Bank of Thailand was capable of handling any problems.
Thailand did not reject foreign investment inflow and was not concerned about capital outflow because the hot money that flew in over past years had not all flown out yet, he said.
There would be no problem if foreign investors drew back some of their capital from Thailand and it was not necessary to come up with any special measures because the country’s financial and fiscal status was strong.
He said the government is now making a feasibility study of issuing infrastructure dollar bonds as a channel to raise funds for financing the government’s 2.2-trillion baht infrastructure development megaprojects and its 350 billion baht water projects.