K-Research: Politics may slash GDP growth

K-Research: Politics may slash GDP growth

2014 scenarios range from 0.5% to 4.5%

As anti-government protests rumble on, Kasikorn Research Centre (K-Research) forecasts national economic growth next year ranging from 0.5% to 4.5%, according to four ways the dispute could play out.

Under a baseline scenario, with a new government installed by the first half of 2014, Thailand's gross domestic product (GDP) is estimated to rise 4.5% over the year, as long as the new administration launches fresh economic stimulus measures.

But if a new government fails to introduce effective stimulus measures, the forecast slips to 3.7%, said deputy managing director Pimonwan Mahujchariyawong.

Under more pessimistic scenarios, with no new government in the first half, the economy nudges up by 2.5% if exports grow 7%, or only 0.5% if exports expand at 3%.

In response to fierce demonstrations, Prime Minister Yingluck Shinawatra has called a snap election for Feb 2 while continuing to govern in a caretaker role.

But protesters want her to step down immediately to make way for an interim government and the establishment of an unelected "people's council".

The dispute will take a heavy toll on domestic consumption and private investment, said Mr Pimonwan.

Under its baseline scenarios, K-Research predicts domestic consumption will tick up by between 2% and 2.4%, while private investment rises at between 3.3% and 5.3%.

But worsening political conflict would stall both indicators, she added.

Spurred by a global recovery led by the US and China, exports are set to climb next year by 3-7%, after edging up only 0.5% this year, according to K-Research.

While political turmoil could scupper the government's seven-year, 2-trillion-baht infrastructure investment plan, with significant economic fallout, K-Research has excluded this possibility from its 2014 GDP growth forecast, said Mr Pimonwan.

The research unit of Kasikornbank earlier predicted that just 50-70 billion baht of the megaproject initiative would be spent next year.

"After the general election, the new government could implement a special economic stimulus package as priority," said Mr Pimonwan.

"Infrastructure megaprojects, meanwhile, would be implemented later. Such project should be a key policy of any new government."

Separately, managing director Charl Kengchon said K-Research's projections reflect an unusual context.

If the situation gradually normalises, the range of GDP forecasts will narrow over the next few months, he added.

Meanwhile, Bank of Thailand governor Prasarn Trairatvorakul ruled out yesterday that growth could be a mere 0.5% next year.

"We're concerned about the economy in the long term. I'm not talking about the short term as we still have confidence now," he said. "But in the long term, businesses are closely tied to the government. Without it, the economy will stall."

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