Thailand's 2015 growth regional laggard, World Bank predicts

The bank has provided the same projection as the Bank of Thailand for expansion of gross domestic product expansion this year at 1.5 per cent, which was revised down from its 3-per-cent projection in April. It also lowered the growth forecast for 2015 from 4.5 per cent to 3.5 per cent, which is lower than the Thai central bank’s 4.8-per-cent projection for next year.

The World Bank’s 4.5-per-cent expectation for the Kingdom’s economic growth in 2015 is lower than the 6.7 per cent it has projected for Philippines, 5.6 per cent for Indonesia, 5.5 per cent for Vietnam, and 4.9 per cent for Malaysia. It is also lower than its projections for developing East Asia (excluding China), at 5.3 per cent, and Asean at 5.0 per cent.

Kirida Bhaopichitr, the World Bank’s senior country economist in Thailand, said the structural problems within the country’s export sector would take some time to solve, while recovery in domestic consumption would remain gradual, because of a high level of household debt and the expected increase of political uncertainty next year.

Meanwhile, the slower-than-expected recoveries of the export sector and domestic consumption will lead to subdued private investment because of lower domestic and foreign demand despite economic clarity from the government’s infrastructure plan and the launch of the Asean Economic Community in 2015.

“The World Bank has revised down the country’s GDP growth [forecasts] for 2014 and 2015 because the recoveries of consumption, domestic investment, and exports in the second half of this year is slower than expected even though the global economy is recovering and there is a functioning government in place, since there are still problems in some sectors,” Kirida said.

“The most critical problem that has damaged and will hamper the country’s economic growth this year and the next is within the export sector. This was caused by lower competitiveness in terms of the products that are being exported, and this problem cannot be fixed this year or next year, since it is a long-term structural problem,” she noted.

Ulrich Zachau, World Bank country director, said the institution welcomed the fact that the government had laid out a clear political road map that will eventually lead to a return to democratic elections. So far the timetable has been kept, which provides some confidence. At the same time, however, the people are still wary on what is going to happen next year, and uncertainty surrounding the recoveries of major economies is also something Thailand has to keep an eye on.

Kirida said the tourism sector was expect to be better next year thanks to the increase in political stability, but the expansion of domestic consumption would only be gradual. People are still not sure about their future incomes, while the high level of household debt is an added constraint.

“The private sector will only invest if there is a potential that it will have to produce more for export or domestic consumption, but since we expected export and consumption to grow at a slow pace, the expansion of private investment will also be sluggish,” she said.

Kirida said the capacity utilisation rate (which measures how much a company uses its production capacity) of companies in Thailand was currently 60 per cent. Companies might feel that they do not have to invest more, since they have not fully disposed of what they have already produced. The normal rate of capacity utilisation is about 90 per cent.

Kirida said the latest World Bank report on Thailand did not take into account the stimulus package that was recently introduced, but the package should be able to accelerate the government’s budget-disbursement rate. This should help GDP growth somewhat. The World Bank expects Thailand’s total consumption (public and private) to grow by 1.7 per cent in 2015, which is more than the 0.8 per cent that is expected for this year.