Central bank cites risks to 2015 growth
Despite a buoyant economic outlook next year, the growth rate could be derailed by delays in government spending, subdued domestic consumption and tepid global economic growth, says a senior Bank of Thailand official.
Don Nakornthab, director for macroeconomic policy, yesterday said dismal global economic growth and sluggish government spending were deemed the main external and internal risks to the economy next year, as reflected in the latest edited minutes by the central bank's Monetary Policy Committee.
"On the external front, the US is the only country among the major manufacturing countries to record a clear economic recovery, while Japan has fallen back into recession," he said.
"Europe is also at risk of returning to recession, but the Bank of Thailand and financial markets did not expect Japan to retreat into recession earlier."
Japan has recorded four recessions since 2008, Mr Don said.
He said the volatility of capital flow stemming from relaxed monetary policies adopted by the Bank of Japan and the European Central Bank was not the main external concern next year as the Bank of Thailand had sufficient foreign reserves to mitigate this.
Slow government spending was a factor denting economic growth in the third quarter, as the fiscal 2013 budget disbursement was recorded at 89%, lower than the central bank's estimate of 91.4%, said Mr Don.
"If government spending returns in the fourth quarter, then we could see a swift rebound, but if it is delayed, then the
traction would decline accordingly," he said.
The economy grew by 0.6% in the third quarter, slightly recovering from a rise of 0.4% in the second quarter, due largely to the non-farm sector, whereas the agricultural sector slowed, according to the National Economic and Social Development Board (NESDB).
The central bank earlier forecast GDP growth of 1.5% this year and 4.8% next year while projecting exports to be flat in 2014 but growing 4% in 2015.
But subpar growth this year along with emerging signs of lower than expected growth next year albeit somewhat improved were grounds to lower the 2014 and 2015 growth forecasts for GDP and exports.
Mr Don said economic growth this year was projected to come below the central bank's 1.5% forecast, and the growth rate could be in line with the NESDB's 1% projection.
Growth in the final quarter must be 3.3% or 3.5% to attain a 1% annual growth ratio, he said.
Domestic consumption and investment are expected to be the main drivers of economic growth in the coming period, Mr Don said.
However, the swelling household debt still restrains domestic consumption from reaching its full potential, he said, adding that the usual growth rate for consumption was 4-5% annually.
Household debt rose to 10 trillion baht or 83.5% of GDP in the second quarter from 82.7% in the first quarter and 77.3% in 2012.