IMF halves Thai forecast

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IMF halves Thai forecast
THE NATION



THE INTERNATIONAL Monetary Fund has revised down this year's forecast for Thai economic growth to 2.5 per cent from the 5.2 per cent estimated previously, mainly because of the political uncertainty. This would be the lowest growth rate among Asean nations.

"The near-term outlook remains clouded by the political situation; the economy is slowing as private demand weakens and public investment plans are delayed," said the IMF's April publication "World Economic Outlook: Recovery Strengthens, Remains Uneven".

The IMF's downward revision for Thailand followed that of the World Bank, which now puts this year's growth in gross domestic product at 3 per cent, and domestic agencies such as the Bank of Thailand with 2.7 per cent and the Finance Ministry's Fiscal Policy Office with 2.6 per cent. Private research houses have cut their forecasts to a range of between 1 and 2 per cent.

IMF's 2014 GDP growth forecast for Asia as a whole is 5.5 per cent, against 5.2 per cent last year. The forecast for Malaysia is 5.2 per cent, Indonesia 5.4 per cent, Vietnam 5.6 per cent and the Philippines 6.5 per cent.

The IMF said in the report that Indonesia's growth was projected to slow this year as subdued investor sentiment and higher borrowing costs weighed on the domestic economy, although the currency depreciation since mid-2013 should give exports a lift. Malaysia and the Philippines, however, were on a more positive trajectory, and growth was expected to remain robust in both countries.

For developing Asia, the economic outlook is largely for continued solid growth with some additional benefit from the recovery in world trade.

The IMF said concerns linked to the external environment remained, but Asia was also facing various idiosyncratic domestic risks stemming from political tensions and uncertainties in several countries including Thailand.

"As growth in the United States improves, Asia will have to adapt to a steady increase in the global term premium. Economics with weaker fundamentals and greater reliance on global finance and trade would be most affected," the IMF paper said.

Japanese stimulus cited

Olivier Blanchard, economic counsellor for the IMF, said in the briefing that in Japan, where the organisation forecast 1.4-per-cent growth this year, fiscal stimulus had played a large role.

According to the IMF report, "Slower growth could have significant negative spill-overs for economics with strong trade and foreign-direct-investment linkages with Japan, such as Indonesia and Thailand - especially if the risk of deflation returns."

Blanchard said emerging and developing economies would continue to have strong growth, lower than before the US-led global crisis but high nevertheless. The IMF forecasts their growth at 4.9 per cent, slightly up from 4.7 per cent in 2013. China's GDP growth would be 7.5 per cent and India's 5.4 per cent.

In China, there are sharper-than-envisaged vulnerabilities, for instance from the implementation of structural reform. This would have significant spill-overs for the rest of the region, especially in economies linked to the regional supply chain and commodity exporters.

In addition to tackling near-term vulnerabilities, Asia should also enhance medium-term prospects, the Fund said. Generally, reforms should focus on removing structural impediments to growth.

The world growth rate is expected to be 3.6 per cent this year and 3.9 per cent next year, up from 3.3 per cent in 2013, thanks to a strengthening recovery, Blanchard said.

He said the recovery appeared strongest in the United States, forecast at 2.8 per cent in 2014. It is also strong in Britain, at 2.9 per cent, and in Germany at 1.7 per cent, though some imbalances persist.


-- The Nation 2014-04-10

[NongKhaiKid]

This is bound to be challenged by the government and one of the gripes will be the IMF, in fact foreigners in general, don't ' understand ' Thailand.

[huanga]

This is bound to be challenged by the government and one of the gripes will be the IMF, in fact foreigners in general, don't ' understand ' Thailand.

Oh, I think they (foreigners) do understand Thailand all right. They just cannot comprehend the stupidity, stubbornness, selfishness, greed mongering.... that manifest in Thais throughout this fiasco while these Thais are preaching to the world about being "grengjai" and "mai pen rai"!

What I do see is a lot of hypocrisy from top to bottom!

[TheGhostWithin]

The IMF does not IMO come up top of the list for getting their growth projections right. But times are more uncertain globally than many mom and dad investors realize. Most Thais do not have a financial mindset and are only focused on living for today - in my experience this seems to be tied in with the Buddhist mindset, something I love about Thailand. Thai business in general I find are reactionary rather than predictor and tend not to anticipate but respond to market conditions.

Serious storms are brewing in China with NPL (Non performing loans) being ignored by the global community in general (except for a few savvy investors) with China relying solely on ongoing growth to continue to cover these NPLs. Just like a gambler at the roulette table who plays "double or nothing" until there is nothing left to bet.

I too think that growth in Thailand is overstated, and think it is going to get worse. I have been holding back for some time on bringing funds in because of what I feel is coming, even though the exchange rate is the highest it has been in a very long time (since the AEC actually). I tend to agree with the IMF in this instance - but largely because of non-political motives rather than political.. foreigners know the system is corrupt, defunct and irrelevant and consider this when investing already.

A combination of high inflation and low interest rates with a dim outlook on predicted overall Thai business performance and net foreign investment outflows being at very high levels is quite simply the perfect storm to seriously eroding almost all forms of assets for anyone not already invested in consumables or companies importing foreign products and services.

Edited April 10, 2014 by TheGhostWithin

[trainman34014]

''Those Blasted Farang; always try to tell truth and not worry about big face lie ''

[antimedia]

It was only going to be reduced to 4.2 percent until Kittaratt gave a speech.

[leggo]

18 months ago you could see the economic bubble was ready to burst and I would suggest it hasn't even begun to bottom out yet - a financial fiasco in the making!

Sent from my i-mobile IQ 2 using Thaivisa Connect Thailand mobile app

[Somtamnication]

With regards to the IMF not getting it right. Even a drunk chimpanzee can forecast this country's projected growth. The politic circus since 2006 has been, shall we say, preventable?

[Bluespunk]

Rice. Rice. Rice.

[TheGhostWithin]

They need to vote this guy in for PM.. at least he can promote growth to "boom" through the sound of his music.. and he has some style to us younger generation.

[slapout]

Rice. Rice. Rice.

Not disputing your anology but jus want tot add a few of my own

rice... given

tablets

new car credit

new house credit

blanket wage increase

flood repair/prevention

consumer inflation cost control

tax credit/givmes to big business

budget increases to favored Ministries

just to name a few

[bushwacker]

I also keep waiting for the exchange rate to reflect all the doom and gloom but it just does not seem to come! As I have to bring money in soon ... I'm hoping .... for some logic

[tim armstrong]

Its about the worldview - or absence of it amongst so many Thais. You don't have to be an economist to see what's happening here. Too many pigs in the trough. I'm surprised to see the Philipines' growth given their fragile politics. I hope the BOT governor and those few like him can return some stability to the economy.

[justjoined]

We've had eight years of turmoil, including a coup, martial law and a deadly army crackdown. None of these have had much of an economic impact.

So maybe the turmoil is only a small part of it, because there's also the money lost with the rice fiasco, the money spent on the 1st car buyers and homeowners schemes, both of which has put a heap of ppl in unmanageable debt.

If the US cuts it's QE program, that will be more bad news. As Western economies improve, investors will be looking there, especially if there's a raise in interest rates or a lowering of rates here.

It will be interesting to see what happens over the coming twelve months. It would be good to here from ppl with decent economic knowledge, rather than knee jerk, bar stool opinions.

[issanaus]

Its about the worldview - or absence of it amongst so many Thais. You don't have to be an economist to see what's happening here. Too many pigs in the trough. I'm surprised to see the Philipines' growth given their fragile politics. I hope the BOT governor and those few like him can return some stability to the economy.

The BOT Governor is one of the reason why the exchange rate and interest rates have remained stable. Others play a differing and opposing role.

[bigbamboo]

That should take the wind out of Kittirat's sails.

Edited April 10, 2014 by bigbamboo

[Bluespunk]

That should take the wind out of Kittirat's sails.

But not unfortunately his blow hard statements.

[larsjohnsson]

Thank you Suthep

[tiffanystoyz]

As i predicted last year the Thai Baht will fall to over 40 to 1 on the USD by July Yingluck is leading the way for thai's.

[belg]

are factories nationwide only working at halve speed because of some people sitting in some streets in bangkok ?

[Jonmarleesco]

With the IMF's new forecast at 2.5 per cent; the World Bank at 3 per cent; the Bank of Thailand at 2.7 per cent; the Finance Ministry's Fiscal Policy Office at 2.6 per cent; and private research houses ranging between 1 and 2 per cent, it's hardly surprising that Galbraith recognised only two types of forecaster: those who don't know; and those who don't know they don't know.