FPO set to cut GDP growth forecast
The Finance Ministry's Fiscal Policy Office (FPO) remains uncertain whether economic growth this year will reach 3% following the mounting political tensions.
Director-general Somchai Sujjapongse said the FPO's average growth forecast of 3.7% is not within reach, as uncertainty over the global economic recovery and Thai political situation still surround the economy.
The FPO is expected to cut its gross domestic product (GDP) growth forecast, previously set within a range of 3.5% to 4%.
Government think tank the National Economic and Social Development Board last month slashed its GDP growth forecast to 3% from a range of 3.8% to 4.3% estimated previously, following downbeat economic data in the third quarter.
The economy grew by 2.7% year-on-year in the third quarter, down from 2.9% in the second quarter and 5.4% in the first, as domestic consumption and private investment lost steam after most automobiles under the government's first-time car buyer scheme were delivered and export demand was weak.
Bank of Thailand governor Prasarn Trairatvorakul said apart from cutting the GDP projection this year to 3% from a forecast of 3.7% in October, the central bank expects bank loan growth next year to expand slightly above 7%, a reasonable rate based on the prediction of 4% economic growth and inflation at 2-3%.
The 7% bank loan growth in 2014 is not a threat to monetary stability, considering the levels of GDP and inflation projections, he said.
He added the 14% expansion of bank loans in 2012 was a concern on the back of 4% GDP growth.
The central bank also cut the projection next year from 4.8% predicted earlier.
The growth forecast next year is based on export recovery on the back of an upturn in the global economy.
Public investment will be the key engine boosting the economy next year as it can pave the way for private investment to follow.
However, public investment next year is unlikely to be high.
The risk for next year is therefore the export sector _ whether it can reap full benefits from the global recovery.
"The current political situation means we must keep our fingers crossed as to whether the economy will be able to expand by 3%," Mr Somchai said.
He said the FPO is keeping a close watch on the economy in the final quarter because the street protests could hurt the tourism industry, which is expected to offset weak exports.