Strong baht to put brake on exports
Oil, politics also hit prospects: chamber
The Chamber of Commerce said yesterday the stronger baht would definitely dampen export expansion in the second half, bringing the official growth forecast down to 15 per cent from the original 17.5 per cent.
Chairman Pramon Sutivong said the economy was reeling from the spiralling oil price, baht appreciation and political disorder.
"The factors will harm the country's exports in the rest of the year," he said.
The government has been counting on 17.5-per-cent growth in exports to US$113 billion (Bt4.3 trillion) this year.
Exports are about the only sector propping up the economy, which is taking a severe beating from soaring oil prices and interest rates. Compoun-ding the economic turbulence is the drawn-out formation of a government, which will push back budget disbursements as well as economic policymaking.
Caretaker Finance Minister Thanong Bidaya admitted that economic growth would likely slow in the second and third quarters, due to the late start of investment projects, which would force the ministry to revise its economic growth projection for this year.
He mentioned the possibility that the ministry's growth forecast could be cut 25 basis points to match the Bank of Thailand's projection of 4.25-5.25 per cent, depending on economic figures in the second and third quarters. His main worry is the flagging property market, which could produce lay-offs.
"The ministry will try to ensure low unemployment, particularly through the construction of Ban Mankong and Ban Ua Athorn [affordable housing], which should spark demand for labour," he said.
Though the economy in the first four months was in good shape, the political mess was dragging the economy down for the rest of the year and this should be addressed to restore investor confidence, he said.
Despite concerns that lower growth would crimp government revenue, Thanong insisted that the fiscal 2007 budget would be balanced, but the ministry was also watching how the current pressures would affect the budget's dynamics.
US Ambassa-dor Ralph Boyce said in an interview with Bloom-berg on Tuesday that a delay in resolving Thailand's political stalemate could trigger a drop in foreign investment in Southeast Asia's second-largest economy.
"If the indecision drags on for an extended period, we do hear from Thai observers, as well as foreign observers, some concerns about what the implications can be for investment and for continued robust economic growth," Boyce was quoted as saying.
"The society is stable," he said. "The economy so far has been performing well." Whether those conditions can be maintained is an "open question" given the political climate, he added.
Pramon said private enterprises were extremely worried about the appreciation of the baht against the US dollar and the incessant rise in the price of oil, which, by pushing up manufacturing costs, would blunt the country's global competitiveness. The baht, 37.80 to the dollar last month, ended at 37.82 yesterday.
The private sector, hit hard by the negative factors and sensing a decline in investor confidence, is closely monitoring the political situation, he said.
Dusit Nontanakorn, secretary-general of the chamber, said companies were now bracing for the harmful trends.
"Our members are trying to reduce their production costs to remain competitive. We, on our own, have to find the way out instead of waiting for the government to do so on our behalf," he said.
The caretaker government has lost some foreign as well as local investors' faith in the country's management, holding up the influx of capital into business, he said.
Deputy Commerce Minister Preecha Laohapongchana said the ministry's survey showed that the political conflicts were not impeding investment of any kind.
"Foreigners still trade with Thai companies but we admit a longer spell of existence of the caretaker government may weaken investor confidence," he said.