FPO predicts weakened revival in second half
The Fiscal Policy Office (FPO) is set to jump on the forecast-cutting bandwagon next month, as the second-half economy is expected to rekindle but the pace is likely to be weaker than earlier expected.
Whether the stimulus package will be implemented and which sectors will be stimulated if that is the case will depend on the new government's decisions, said FPO policy adviser Pornchai Triraveja.
The Finance Ministry's think tank in April cut its forecast for 2019 growth to 3.8% from 4% predicted three months ago due to sagging exports.
The Bank of Thailand on Wednesday slashed its GDP growth forecast to 3.3% from the 3.8% predicted in March to reflect its cut in the payment-based exports forecast to flat from the 3% rise seen three months earlier.
Mr Pornchai said the export sector dictates the country's economic circumstances because outbound shipments of products and services account for 77% of GDP, while product exports account for 56%.
Customs-cleared outbound shipments fell by 5.8% year-on-year in May to US$21.01 billion after contracting 2.6% in April and 4.9% in March.
For May, foreign travellers fell 1% from a year earlier to 2.73 million, and tourism income also was down 1% at 134 billion baht, largely due to the decline in Chinese tourists.
Capital goods imports, an indicator of private investment, shrank 6.9% on year in May, while commercial truck sales jumped 5.2%.
However, the agricultural production index clawed back to 0.6% year-on-year growth in May and value-added tax (VAT) revenue -- a proxy of private consumption -- rose 5% from a year ago.
VAT receipts from domestic consumption rose 5.8% in May from a year earlier, while the VAT take from imports rose 4%.
Tax revenue on property transactions and cement sales, suggestive of activity in the construction sector, contracted 15.3% and 3.1% respectively last month from a year earlier.
Meanwhile, Deputy Prime Minister Somkid Jatusripitak reiterated on Thursday that the new coalition government is unlikely to see any hurdles to driving economic growth and will continue infrastructure development projects.
"I do hope that development of infrastructure projects will be continued and the coalition government is not an obstacle to the planned megaproject development because all parties have agreed that infrastructure projects play a significant role in the country's overall development and benefit all Thai people," Mr Somkid said.
According to the National Economic and Social Development Council, 20 projects worth 1.38 trillion baht under the 2016 transport action plan are under construction and bidding, while most of the 36 projects worth 895.76 billion baht under the 2017 transport action plan are under construction, bidding or feasibility study.
"Forecast cuts by several parties come as no surprise because of the drastic impact of the global economic slowdown and the escalating trade war," Mr Somkid said after presiding over the Saha Group Fair on Thursday. "But we still believe that once the political situation becomes stabilised and the new cabinet has been formed, all economic drivers will return to normal and accelerate."
He said sped-up investment by the new government is expected to bolster the economy and help GDP grow at a faster pace in the latter half of the year.
The new administration is expected to start by August, while the fiscal 2020 budget is projected to begin disbursement by December, he said.
The disbursement of investment worth a combined 70-80 billion baht will be delayed from the normal schedule that starts on Oct 1.
The fiscal 2020 budget was set at 3.2 trillion baht, up by 200 billion from fiscal 2019, which ends Sept 30, with a projected budget deficit of 450 billion baht.