BANGKOK, April 2 – The Asian Development Bank (ADB) has forecast Thailand’s GDP growth at 2.9 per cent this year in light of the political impasse.
Luxmon Attapich, ADB senior economist, said yesterday that the initial predicted growth at 4.5 per cent was lowered to the same as last year based on the assumption that the new government will take office and work in full force in the second half of the year.
GDP will plunge below 2 per cent if the administrative vacuum continues until the third quarter, she said, adding that the political stalemate has diminished confidence among tourists, consumers and the private sector, affecting consumption and investment.
Private consumption has slowed down due to delay in the government’s rice payment to farmers and the uncertainty of the rice pledging scheme, she said.
Ms Luxmon said household debt surged to 80.1 per cent of GDP in last year’s third quarter, consequently pushing down the growth of private consumption to only 1.5-2 per cent.
The ADB is monitoring GDP in Q1 after disappointing economic performance in the last two months but it is optimistic that the economy in Q2 should improve.
Private investment has been inactive after the Constitution Court rejected the government’s Bt2 trillion project for infrastructure development, a delay in the water management programme and delays in many state projects.
She predicted export growth by 5.5-6 per cent given strengthened economy in the US and Europe and weakened baht.
This year’s inflation will be slightly higher at 2.4 per cent thanks to the baht depreciation and rising cooking gas price but it is expected that the central bank will maintain the police interest rate at 2 per cent until the end of the year to help stimulate the economy, said Ms Luxmon.
When the political situation improves and the new government takes office, speedy public spending and budget disbursement will contribute to an economic growth at 4.5 per cent.
Thailand’s forecast GDP growth at 2.9 per cent this year will be the lowest among Southeast Asian countries, with the Philippines at 6.4 per cent, Indonesia 5.7 per cent and Malaysia 5.1 per cent, said the ADB economist.