Political uncertainty weighs on Thai economic growth
Thai economic growth this year is unlikely to pass 4 percent as economists have recently revised the growth downward because the Thai exports are facing strong headwinds amid local political uncertainty.
The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) last week lowered the economic growth forecast for 2019 from 4.0-4.3 percent initially to 3.7-4 percent due to worse-than-expected export performance. It also decreased the export growth projection from 5-7 to 3-5 percent.
JSCCIB called for political parties to follow the rules to bring about political stability. Otherwise, the economic growth this year can be worse because the revised figures have not taken into account the political factor.
Kalin Sarasin, chairman of the JSCCIB and chairman of the Thai Chamber of Commerce, added that, right now, tourism is the only functioning engine to drive the economy forward. However, the prospects for tourism is not bright either as air pollution has already affected tourism in the northern provinces.
Kasikorn Research Center last week revised its economic growth forecast for 2019 from 4.0 percent to 3.7 percent. Earlier, the Bank of Thailand lowered its growth forecast from 4 percent to 3.8 percent. Siam Commercial Bank’s Economic Intelligence Center also predicts that Thai economy in 2019 to reach 3.8 percent.
In spite of their earlier projections, these economists now think the situation is worse than expected.
The lower growth is attributed to slowing outbound shipment from Thailand as the global demand was dampened by the ongoing trade spat between the US and China. Positive signs over the possible solution of the trade war may come a bit too late.
The World Trade Organization said last week the world trade lost its momentum and expanded more slowly than expected in 2018 due to rising trade tensions and increased economic uncertainty. WTO economists also expected merchandise trade volume growth to fall to 2.6 percent in 2019 — down from 3.0 percent in 2018.
Adding salt to the wound, Thailand’s political situation has also discouraged Thais to spend. The Consumer Confidence Index (CCI) last month came in at 80.6, the first drop in three months and the lowest so far this year, said the University of Thai Chamber of Commerce’s Center for Economic and Business Forecasting Thanavath Phonvichai.
According to Thanavath, the UTCC expects the Thai GDP to expand 3.5-3.8 percent. However, the center will revise the Thai GDP growth forecast again after May 9, 2019 when the Election Commission is scheduled to announce the official outcome of the general election.
“We are waiting to see more clarity of domestic political situations. Which political camp will lead the coalition government and what will be the economic policies of the new government?” Thanawath said.
He said that if the new government is formed by June and the new government can implement economic policies as planned, the Thai economy in the first half of the year may expand between 3.3-3.5 percent. And if the political situation is stable in the last six months of 2019, the Thai economy can rise 3.7-4 percent in the second half.
“But if political uncertainties lead to unrest on the street, that will be affect the drivers for growth especially tourism,” he said.
Thanavath urged the current government to implement stimulus economic policies to boost the economy during the political transition before the incoming of new government.
Nattaporn Triratanasirikul, an economist of Kasikorn Research Center, said that Kasikorn Research Center revised the Thai economic growth to 3.2-3.9 percent this year, lower than initial estimates chiefly because of slowing exports.
Thailand’s outbound shipment in 2019 is expected to expand only 3.2 percent compared to initial forecast of 4.5 percent and the imports are set to rise only 4.3 percent compared to the initial projection of 5.3 percent.
She said the Thai economy in the remainder of the year hinges chiefly upon domestic factors especially political situation.
“If the new government is formed by June and the economic stimulus measures are implemented as planned, they should push the household consumption at the tune of 0.2-0.4 percent of the country’s GDP.
But if we don’t have a new government by June and exports expand only 2.5 percent, Thai GDP may grow only 3.2 percent this year,” she said.
Finance Minister Apisak Tantivorawong said that the political uncertainty may prompt investors to delay their new investment. Investors, especially foreign ones, said they prefer to wait until the political situation becomes clearer before making investment decision, he said.
Apisak said the government therefore is trying to boost public investment in infrastructure projects to keep the economy going during the political transition.
“We have to cushion the growth of the economy. We would not want to the economy to sharply slow down because it would be harder to get the economy back on track,” he said. By ThaiPBS World’s Economic News Desk