World Bank, SCB unit slash views

World Bank, SCB unit slash views

Global lender says 2016 apt to be worse

High-rise buildings are still under construction in Bangkok but the latest cuts to Thailand's full-year growth outlook suggest a longer wait for a solid recovery. (Photo by Thanarak Khunton)
High-rise buildings are still under construction in Bangkok but the latest cuts to Thailand's full-year growth outlook suggest a longer wait for a solid recovery. (Photo by Thanarak Khunton)

The World Bank and the SCB Economic Intelligence Center (EIC) have jumped on the forecast-cutting bandwagon for this year and next, fanning fears that there is no light at the end of tunnel for the Thai economy.

In a press release, the World Bank said GDP growth in Southeast Asia's second-largest economy would come in at an estimated 2.5% this year, down from the previous 3.5% view.

The bank said household consumption and private investment would recover only modestly from last year, while exports would remain subdued, growing by less than 1% in US-dollar terms on weakening demand in China and Asean.

Given that Thailand's economy grew by 2.9% year-on-year in the first half, the global lender's downwardly revised forecast signals pessimism that Thailand's economic engine is gathering steam in the second half.

To make matters worse, the World Bank painted an even gloomier picture for 2016, slashing its GDP growth view to 2% from 4%.

If the bank's forecasts hold, Thailand's economy will become the slowest growing in Asean.   

The World Bank's outlook is more downbeat than that of the Bank of Thailand, which last month cut its GDP growth forecasts to 2.7% in 2015 from 3% and to 3.7% in 2016 from 4.1%.

The government's recent launch of stimulus packages will have a short-term effect on public consumption, said Shabih Ali Mohib, the World Bank's Bangkok-based programme leader for equitable growth, finance and institutions.

But he said greater private investment and government spending on infrastructure would induce a medium-term stimulus to Thai economic growth.

The World Bank did not predict the percentage of growth to be generated by the stimulus measures, saying the effects would take time to materialise.

Last month, the government approved two economic stimulus packages to put money in the pockets of rural residents and give small and medium-sized enterprises (SMEs) better access to financing.

Low-income earners and SMEs have been hit hard by the sluggish economy, tepid purchasing power and swelling household debt.

"Public spending will contribute to almost half the growth this year," Mr Mohib said. "Tourist receipts are expected to record healthy growth in the context of enhanced political stability, although prospects may be hampered by the attack on the Erawan Shrine in August."

Exports of goods and services in dollar terms are forecast to expand by 0.8% this year, down from the bank's earlier projection of 3.5%.

"The reason why we're seeing exports in positive territory is because the global economy is rebounding and there is demand," Mr Mohib said.

He said public spending, consumption and tourism would be the main growth drivers for the Thai economy next year.

The bank's 2016 export growth forecast of 1.8% is based on ebbing global demand and the fragile state of confidence in the Thai economy.

"That is why you see the composition of real GDP growth essentially taking into account moderate exports as well as moderate private consumption, which leads us to have a growth projection of 2% and 2.4% in 2016 and 2017," Mr Mohib said.

But he said next year's growth could be higher than forecast if public investment in infrastructure projects ramped up.

In the meantime, SCB EIC, the research unit of Siam Commercial Bank, trimmed its 2015 GDP growth forecast to within a range of 2% to 2.2%, down from 3%, and its 2016 view to within a range of 2.5% to 3.3%, down from 3.3%.

Dismal exports, battered by China's economy slowing to an estimated 6.8% this year and 6.3% next year, are partly to blame for the Thai economy's weak outlook, said Phacharaphot Nuntramas, head of economic and financial market research at SCB EIC.

The research house forecasts Thai exports will plunge by almost 5% this year before improving to a 2% contraction next year.

With the bleak export outlook, government spending remains the key to economic expansion next year, Mr Phacharaphot said.

He said the recent stimulus packages would improve domestic consumption, while infrastructure projects would spur private investment and economic growth.

"The private sector does not need to increase capacity use, but its R&D investment will boost long-term potential and competitiveness amid a changing global economic landscape," Mr Phacharaphot said, adding that private-sector R&D investment represented just 1-2% of GDP.

Do you like the content of this article?