BoT says GDP growth could fall short

BoT says GDP growth could fall short

The Bank of Thailand is more pessimistic on economic growth which could come below the target.
The Bank of Thailand is more pessimistic on economic growth which could come below the target.

The Bank of Thailand has turned more pessimistic on this year's economic growth, saying risks to its 4.4% forecast are tilted to the downside.

Economic growth this year could come in below the 4.4% forecast, dampened by weak exports and tourism, said Don Nakornthap, senior director of the economics and policy department.

The central bank's rate-setters are scheduled to meet on Dec 19 to decide the rate direction and review economic growth estimates for this year and next.

The central bank forecasts GDP growth of 4.4% this year and 4.2% in 2019.

The economy is expected to grow in a range of 4-4.4% this year, Mr Don said, adding that growth will hit the top end of the range only if the economy expands by 4.8% during the final three months.

"It's quite a challenge to meet 4.8% growth in the fourth quarter when the third quarter expanded at 3.3%," he said.

Thailand delivered the best annual growth pace in five years of 4.9% in the first quarter of 2018, but the pace cooled to 4.6% in the second quarter and 3.3% in the July-September period.

For the first nine months, the economy grew by 4.3% year-on-year.

The weaker economic performance in the third quarter prompted the government's think tank, the National Economic and Social Development Board (NESDB), to downgrade its 2018 GDP growth forecast to 4.2% from the previous 4.2-4.7% range.

Mr Don said another challenge is to achieve the Commerce Ministry's export growth target of 8% this year.

Export value must average US$22.1 billion baht a month during the final two months to achieve the 8% target, he said.

The central bank's current forecast for exports is 9% growth.

The Commerce Ministry and the Bank of Thailand use different bases for export and import data. The former uses customs-cleared figures, while the latter uses payment-based numbers.

In October, value of merchandise exports expanded at 8.4% from the same period last year, improving from a contraction of 5.5% in the previous month, according to central bank data.

The rebounding growth was the result of dissipated temporary factors in major trading partners, particularly in Japan, which contributed to the bounceback in exports of electronic products.

Foreign tourist arrivals in October contracted by 0.5% year-on-year, mainly due to a 19.8% decline in Chinese tourists. October's slump marked the largest contraction of the past 19 months.

But the overall economy expanded in October, driven by both domestic and external demand, particularly private consumption. Car sales were a key contributor to strong private consumption and the increase in durables index to 10.8% from 6.1% in the previous month.

Mr Don said the country's car sales growth is expected to continue into December and the first half of next year, due to the end of the five-year ownership lock-up period under the first-time car buyer scheme.

In addition, private consumption in October significantly expanded across categories.

Non-farm income rose in all sectors, with the exception of services, whose growth was steady.

The farm income rebound was attributed to increased agricultural output, while farm product prices continued to shrink, albeit at a softer pace.

Domestic consumption is expected to continue to support the economic expansion next year, though domestic spending before the general election in February next year is unlikely to significantly boost private consumption.

"Under statistical data of the NESDB, it found that domestic spending before general elections in the past did not benefit private consumption and economic growth significantly," Mr Don said.

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