Bleak outlook for Thai economy

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BKKThe political tensions in Thailand are taking their toll on the economy. While tourism arrivals dropped 15 per cent from November 2013, Bank of Thailand Governor Prasarn Trairatvorakul acknowledged on December 12 that if a new government is not formed in 2014, economic expansion could be affected “to a certain degree”, as the government remains a key driver of the economy through spending and public investment.

Economists are convinced that the situation will have an impact on the economy in 2014, but are split over the extent of the impact.

Moody’s Investors Service said the dissolution of the House of Representatives and the snap election were negative for Thailand‘s credit rating. Thailand will continue to face anti-government demonstrations because protesters do not accept a democratic system based on majority rule by its opponents, Moody’s said.

Kasikorn Research Centre also said the political situation and particularly exports would largely dictate the growth rate of next year’s gross domestic product and gave a range of 0.5-4.5 per cent.

UBS forecasts consumer-spending growth from 2014-15 to fall below its 10-year average.

However, Bangkok Bank believes the economy is still capable of growing by 4-5 per cent next year.

As Moody’s pointed out, the key credit-negative feature for the sovereign rating is that prolonged protests will weigh on an already fragile growth outlook for 2014. The heightened political tensions have marred investor confidence, as reflected in the accelerated decline in Thailand’s official foreign-exchange position since late October.

KResearch warned that although the economic recoveries in the US, the European Union, China and Japan would boost exports next year, if the domestic political strife is prolonged and becomes violent, the economy would take a big blow from all the negative consequences that might come along with it.

For the most optimistic outlook, if there is a government that is acceptable to all sides, either via election or appointment, and the regime can regain investors’ confidence while realising the need to stimulate the economy, GDP growth might reach 3 per cent in the first half of 2014 and might accelerate to 6 per cent by the second half, KResearch said

In the second case, if the new government does not stimulate the economy or if the effect of the stimulus is sluggish, GDP would grow by 3.7 per cent in 2014.

In the third scenario, if there is no new government by the first half but the export sector is doing well as expected, GDP growth would be 2.5 per cent in 2014.

In the fourth and worst case, if there is no new government by the first half and the performance of the export sector is poor, GDP growth would be only 0.5 per cent in 2014.

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Reading Time: 2 minutes

The political tensions in Thailand are taking their toll on the economy. While tourism arrivals dropped 15 per cent from November 2013, Bank of Thailand Governor Prasarn Trairatvorakul acknowledged on December 12 that if a new government is not formed in 2014, economic expansion could be affected “to a certain degree”, as the government remains a key driver of the economy through spending and public investment.

Reading Time: 2 minutes

BKKThe political tensions in Thailand are taking their toll on the economy. While tourism arrivals dropped 15 per cent from November 2013, Bank of Thailand Governor Prasarn Trairatvorakul acknowledged on December 12 that if a new government is not formed in 2014, economic expansion could be affected “to a certain degree”, as the government remains a key driver of the economy through spending and public investment.

Economists are convinced that the situation will have an impact on the economy in 2014, but are split over the extent of the impact.

Moody’s Investors Service said the dissolution of the House of Representatives and the snap election were negative for Thailand‘s credit rating. Thailand will continue to face anti-government demonstrations because protesters do not accept a democratic system based on majority rule by its opponents, Moody’s said.

Kasikorn Research Centre also said the political situation and particularly exports would largely dictate the growth rate of next year’s gross domestic product and gave a range of 0.5-4.5 per cent.

UBS forecasts consumer-spending growth from 2014-15 to fall below its 10-year average.

However, Bangkok Bank believes the economy is still capable of growing by 4-5 per cent next year.

As Moody’s pointed out, the key credit-negative feature for the sovereign rating is that prolonged protests will weigh on an already fragile growth outlook for 2014. The heightened political tensions have marred investor confidence, as reflected in the accelerated decline in Thailand’s official foreign-exchange position since late October.

KResearch warned that although the economic recoveries in the US, the European Union, China and Japan would boost exports next year, if the domestic political strife is prolonged and becomes violent, the economy would take a big blow from all the negative consequences that might come along with it.

For the most optimistic outlook, if there is a government that is acceptable to all sides, either via election or appointment, and the regime can regain investors’ confidence while realising the need to stimulate the economy, GDP growth might reach 3 per cent in the first half of 2014 and might accelerate to 6 per cent by the second half, KResearch said

In the second case, if the new government does not stimulate the economy or if the effect of the stimulus is sluggish, GDP would grow by 3.7 per cent in 2014.

In the third scenario, if there is no new government by the first half but the export sector is doing well as expected, GDP growth would be 2.5 per cent in 2014.

In the fourth and worst case, if there is no new government by the first half and the performance of the export sector is poor, GDP growth would be only 0.5 per cent in 2014.

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