The Bank of Thailand (BoT) has cut the country’s gross domestic product (GDP) forecast for the year to 2.7 per cent from 3 per cent after Thailand’s Constitutional Court ruled that a general election held in February was invalid.
According to Assistant BoT Governor Paiboon Kittisrikangwan, the court verdict was not among the factors influencing the latest GDP forecast in October last year. Not only a GDP cut to 2.7 per cent, but Mr Paiboon said that ongoing political instability and the delay of the new government formation will likely result in lower domestic consumption as well as a decline of new investments by 0.5 per cent.
Meanwhile, the national budget allocation for the 2014 fiscal year will likely be delayed for a quarter due to the dissolution of the lower house of Parliament. Investments in infrastructure and water-management projects will expand only at 2.5 per cent, accounting for Bt17 billion and Bt12 billion respectively.
Thai exports, however, are projected to grow 4.5 per cent this year following the global recovery, while imports would grow 1.1 per cent. Prolonged political instability to the latter half of 2014 may lead to lower tourism confidence and regional growth.
The central bank also foresees a 4.8 per cent growth in 2015 due to the rise of planned infrastructure development investment. Private investments are expected to grow 10.2 per cent, while state investment would grow 2.5 per cent.
Export figures in 2015 are set to rise 7.7 percent, while next year imports would rise 9.1 per cent following a boost of domestic consumption and investments.
The bank expected the rise in inflation to 2.5 per cent this year following the recent revision of liquefied petroleum gas (LPG) price but it is not too worrisome as inflation is expected to be only 2.3 per cent next year.
Mr Paiboon also said that the Monetary Policy Committee’s recent decision to cut its benchmark interest rate by 0.25 percentage points to 2 per cent is believed to help lessen household debt burdens and boost overall economy.