4% floor seen for H1 GDP growth

Economic growth of at least 4% is expected in the first half, underpinned by a low base effect from the year-before period, improving domestic consumption and speedier budget disbursement, say economists.

Growth is estimated at 4.4% in the first quarter and 3.8% in the second quarter, said Kampon Adireksombat, chief economist at Tisco Financial Group.

A rebound in exports, tourism and high-end private consumption is seen driving growth.

“Private consumption is likely to record a two-tier recovery as low-income earners are dragged by the decline in farm incomes,” Mr Kampon said.

He said first-half export growth could reach 2% thanks to a low base effect from the same period last year and higher shipments to neighbouring Cambodia, Laos, Myanmar and Vietnam.

The economy shrank by 0.1% year-onyear in the first half of 2014 as pre-coup political turmoil took a toll on consumer and investment confidence.

Dwindling tourism and the tepid state of exports, which declined by 0.2% in last year’s first half, made for a double whammy.

Full-year GDP growth in 2014 came in at 0.7%, the lowest reading since 0.1% in flood-hit 2011. A 0.3% drop in exports exceeded the 0.2% decline in 2013.

Mr Kampon said major downside risks to the economy included low farm incomes, an anticipated mid-year rise in the US Federal Reserve’s benchmark interest rate and lower-than-expected growth in China.

Tisco forecasts full-year GDP growth of 4.5% in 2015.

Economic growth is expected to accelerate to 5% in the second half, aided by domestic consumption, exports, tourism and pent-up demand in private investment.

Low interest rates and declining oil prices should contribute as well.

Mr Kampon said the Bank of Thailand’s Monetary Policy Committee would probably keep its 2% policy interest rate unchanged at this moth’s meeting to maintain financial stability.

However, the chance of a rate cut remains if growth is deemed lacking.

Tim Leelahaphan, the Thailand economist at Maybank Kim Eng Securities, agreed, saying: “Recovery momentum should continue into the first quarter, as seen by the improved data in the fourth quarter.”

Export growth could possibly reach 2-3% in the first half, although the export value of oil-related items could dip due to tumbling oil prices, Mr Tim said.

He said swelling household debt could offset consumer benefits from stimulus measures and tumbling oil prices. Political uncertainty may also continue to dampen private investment confidence.