Finance Ministry sounds GDP alert

Growth likely to be at lower end of forecast

The Finance Ministry says full-year economic growth may end up near the lower end of an estimated range of 4-5% on weak exports, anaemic consumption and dwindling private investment.

To achieve 4% growth, gross domestic product (GDP) must grow by at least 4.4% in the third and fourth quarters, assuming that second-quarter growth comes in lower than the 4% forecast, Ekniti Nitithanprapas, deputy directorgeneral of the Fiscal Policy Office, said yesterday.

Mr Ekniti’s remark underscored the recent forecast by National Economic and Social Development Board deputy secretary-general Porametee Vimolsiri that economic growth is likely to stand at 4% this year.

For its part, the Bank of Thailand on July 19 sharply cut its projection from 5.1% to 4.2%.

Swelling household debt is depressing purchasing power and domestic consumption. Thailand’s household debt is now 80% of GDP, due to a lengthy low-interest environment, easy credit and the state’s (now lapsed) first-time car buyer scheme.

‘‘The only engine left to stimulate the economy is government spending,’’ said Mr Ekniti.

While policymakers pinned hopes on the government’s investment in 2 trillion baht in infrastructure projects and a 350-billion-baht water management scheme to boost the economy in the second half, it remains doubtful whether any spending at all will begin this year.

The Administrative Court last month barred the government from proceeding with water management projects, saying public hearings must come first.

The disruption raised worries about infrastructure megaprojects, the subject of a 2-trillion-baht loan bill to be weighed in parliament later this year.

In related news, Mr Ekniti said weak domestic consumption and private investment in June continued, evidenced by a 2.6% year-on-year contraction in value-added tax collection and a 5.1% year-on-year shrinkage in capital goods imports.

Full-year GDP growth of 4% would be satisfactory, Bank of Thailand governor Prasarn Trairatvorakul said after meeting Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong yesterday.

The growth is needed to keep the country’s guard up amid growing global uncertainty, said Mr Prasarn, adding that the country’s foreign reserves are sufficient to cushion the economy against any headwinds.

He said Thai exports in the second half are expected to grow by less than the Bank of Thailand’s 4% forecast, due to the tepid pace of global economic recovery.

Despite the sluggish growth outlook for Thai exports, Mr Prasarn said that the nascent economic recovery in major economies such as China and the US could help to boost Thai exports moderately.

High household debt has not had a ripple effect on the Thai economy, he said, thanks to low unemployment and steady monthly income.

Meanwhile, Thai Chamber of Commerce vice-chairman Somkiat Anuras said a survey of 250 members found slowing economic growth in all regions except eastern Thailand.

Of respondents, 43% said the economy could get worse in the second half, while 18.5% said economic growth remains sound.