4-5% GDP forecast may be cut
Rumour says 0.25% cut due in late April
The Bank of Thailand (BOT) is likely to cut Thailand's gross domestic product (GDP) forecast this year from the current estimate of 4-5 per cent because of weak private investment and domestic consumption.
Market speculation is rife that the central bank will cut the prediction by a quarter percentage point. The central bank, late in January this year, revised downward its economic growth estimate by half a percentage point from 4.5-5.5 per cent.
The new forecast is expected to be announced late in April after the Monetary Policy Committee (MPC) meeting on April 11.
"Oil prices, which are rising now, are not higher than during the same period last year. Meanwhile consumption remains weak. Therefore, oil prices would not spike inflationary pressure," BOT director for the Monetary Policy Department, Amara Sriphayak, told reporters.
Domestic consumption and investment will recover in the second quarter this year due to the downward interest rate trend, government spending acceleration and the scheduling of the general election set for mid-December, she said.
"Low consumer confidence and lower-than-expected GDP growth in the fourth quarter last year at 4.2 per cent are the main factors for the slowdown in the economy. However, there are positive factors, which caused the economy to slow down only a little bit," she said.
Amara agreed with the Fiscal Policy Office that the economy would bottom out in the first quarter this year.
According to the BOT's February data, consumption and investment growth remained very sluggish. Private consumption fell at an annual rate of 1.2 per cent in February, versus a revised contraction of 0.8 per cent in the previous month.
Consumption decline in February could be ascribed to car sales that month, which contracted at a year-on-year rate of 18.6 per cent, and motorcycle sales, which shrank by 14.7 per cent.
Car and motorcycle sales in January slipped 10 per cent and 17 per cent year on year, respectively.
Cement and commercial car sales in February slumped at 4.6 per cent and 18.1 per cent, respectively.
Growth in private investment slipped further, a contraction of 1.8 per cent year on year, versus a revised contraction of 0.8 per cent in January.
Amara, however, rushed to soothe market jitters by saying that February consumption and investment figures are subject to revision and the real figures provided by the National Economic and Social Development Board (NESDB) are unlikely to decline.
For example, private investment figures in the fourth quarter last year issued by the central bank rose 0.3 per cent but jumped 3.3 per cent when released by the government's think tank.
Business sentiment index in February was 42.9, well below the 50-threshold but the business sentiment three months ahead is expected to recover to 51.3.
The manufacturing production index was up 5.5 per cent on year, easing from a revised 8.4 per cent in the previous month partly due to the shift in Lunar New Year holidays to February this year from January in 2006.
Capacity utilisation in February fell from 76.3 per cent in January to 73.5 per cent, due mainly to the slowdown in auto manufacturing as auto makers at that time launched new models.
Exports in January surged 17.8 per cent and imports grew 4 per cent, leaving a trade surplus of US$800 million (Bt28 billion).
Sales growth of companies with over 60 per cent of output exported in February rose at a whopping rate of 17.7 per cent on year, that of companies with less than 30 per cent of the total production shipped overseas contracted at an annual rate of 2.3 per cent. Companies with an export ratio between 30 and 60 per cent of total output saw their sales slump at the annual rate of 0.8 per cent in February.
January current-account surplus totalled $1.54 billion, up from $1.22 billion in the previous month, while the trade surplus widened to $808 million from $732 million in December, Amara said.
Trade and current-account surpluses widened in January due to continued strength in exports and tourism and a drop in the price of imported oil during the month, the central bank reported yesterday.