Public spending to lead economic growth in H2, KResearch says

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Public spending to lead economic growth in H2, KResearch says
Erich Parpart
The Nation

BANGKOK: -- All four economic engines - consumer consumption, business investment, government spending and exports - will propel growth in the second half of the year, spearheaded by the public sector, said Kasikorn Research Centre.

Pimonwan Mahujchariyawong, deputy managing director at KResearch, said gross domestic product could expand 4.3 per cent in the second half. She said that would be the result of increased certainty in government spending policies, improved business sentiment from less political uncertainty, and the return of consumer confidence, which would raise domestic consumption.

KResearch earlier announced that it had raised its GDP growth forecast for 2014 from the March prediction of 1.8 per cent to 2.3 per cent.

It saw GDP shrink by 0.6 per cent in the first quarter but sees positive growth in the remaining three quarters - 1 per cent for the second, 3.6 per cent for the third and 4.9 per cent for the final quarter.

"Economic policies from the public sector have provided the private sector with the confidence to resume normal economic activity, and the current improvement in the economic environment can be compared to a plane that is about to take off after it has been parked in the maintenance hangar for months," Pimonwan said.

She said the slowdown in domestic spending and the hit to tourism from the political uncertainty, along with the slower-than-expected recovery of the export sector, would result in GDP growing only 0.2 per cent in the first half of the year. However, she said the return of government spending through the fiscal 2015 budget and the National Council for Peace and Order's stimulus package should boost the economy in the second half.

NCPO policy

KResearch believes that the NCPO's economic policies should help expand GDP by 1.0-1.5 per cent, which could be split into the Bt92-billion payment to farmers under the rice-pledging scheme (0.5 per cent), the approval of delayed projects worth Bt700 billion by the Board of Investment (0.5 per cent) and the acceleration of state spending (0.2-0.3 per cent).

However, apart from the positive factors that can drive the economy, there are also negative factors that have the potential to slow down this progress, and most of it comes from external pressures Pimonwan said. This includes the continuation of a slow recovery in the export sector, which is hampered by lower competitiveness and falling crop prices, and the falling number of foreign tourists (the sector contracted by 5.9 per cent in the first five months).

Rising inflation pressure as a result of increased prices of goods and the potential of an increased global oil price due to the situation in Iraq are also concerns.

KResearch projected the price of crude oil at US$105-$107 per barrel in 2014, but if the situation in Iraq pushed it up to $110-$111 for more than a month, it would have a definite impact on the Thai economy.

The research centre believes that GDP could fall by 0.6 per cent if the oil price increases 10 per cent. Inflation would also take a hit from rising production costs, increasing by 0.8 percentage point, while exports would also suffer slightly. "External pressure poses a mid-term risk for the Thai economy, but if there is no widespread violence [in Iraq] and the impact of the situation on the world's economy and the price of oil is minimal, KResearch believes that the economy should be able to return to its normal potential," said KResearch managing director Charl Kengchon.


-- The Nation 2014-06-24

[terryp]

this has to be the biggest load of bull ever ...LOOK AROUND people have no money and as for exports the weak baht will help but even china is having problems

but if there is no widespread violence [in Iraq] DO THESE PEOPLE WATCH THE NEWS

[shirtless]

I find it hard to believe , the worlds financial situation is far fro robust how does Thailand buck this trend, I see many vendors aimlessly walking the beach all day long with no tourists in sight, this appears to not be the only case for lack of customers.

[worgeordie]

If they keep repeating the good news over and over it might

come to fruition,but maybe they should tell Thai people the

real truth.that would be a novel idea.

regards Worgeordie

[Chris Lawrence]

Nation locked in Groundhog Day reporting.

"there are also negative factors that have the potential to slow down this progress, and most of it comes from external pressures Pimonwan said. This includes the continuation of a slow recovery in the export sector, which is hampered by lower competitiveness and falling crop prices, and the falling number of foreign tourists (the sector contracted by 5.9 per cent in the first five months)."

Got nothing to do with the decisions that have been made internally? Of course external factors have a bearing, but the countries that are preparing for external concerns should have the economy's in better condition.

The better report would have been, "and this is what we are going to do to cover the country in case of......".

What advantages are out there at the moment? for Thailand? These guys doing the research are from the Bank, can't they forcast what direction to head?

[rickirs]

"KResearch believes that the NCPO's economic policies should help expand GDP by 1.0-1.5 per cent, which could be split into the Bt92-billion payment to farmers under the rice-pledging scheme (0.5 per cent), the approval of delayed projects worth Bt700 billion by the Board of Investment (0.5 per cent) and the acceleration of state spending (0.2-0.3 per cent)."

Not to belabor some of the questionable points of the KResearch report, but NCPO's stimulus policies are financed by potentially unlimited government borrowing (due to suspension of the constitution). Due care must be taken to balance expenditures with receipts to maintain an economy within Thailand's means to meet its debt obligations or the economy will not only stagnate but worsen. Some hard economic choices may need to be made that will not bring immediate happiness to the nation but secure Thailand's economic future in YEARS to come. And there will be decisions to be made that are in response to domestic and world events, and foreign government policies that are beyond Thailand's prediction or control.

[HUAHIN62]

If they keep repeating the good news over and over it might

come to fruition,but maybe they should tell Thai people the

real truth.that would be a novel idea.

regards Worgeordie

And loose face NEVER!!!!! The only way consumer spending can lift the economy is by increasing the debt load of consumers and most consumers are already maxed out. The increase of cash withdrawals from credit cards have been on the increase during the first Q which is a good indication some people are surviving on their credit cards. Without an improvement in the economy and productivity wages and incomes won't increase and thus consumer spending can't increase on a healthy basis.

[Krataiboy]

"Pimonwan Mahujchariyawong, deputy managing director at KResearch, said gross domestic product could expand 4.3 per cent in the second half. She said that would be the result of increased certainty in government spending policies, improved business sentiment from less political uncertainty, and the return of consumer confidence, which would raise domestic consumption".

"Could expand 4.3 per cent" . . . or not. What extraordinary crystal gazing, based entirely on the totally unjustified assumption of an upswing in public, consumer and business confidence over the next year.

No mention of all, for some inexplicable reason (loss of face?), of the hit Thai is certain to take in terms of tourist and trade revenue resulting from international condemnation of the recent coup and ongoing martial law - not to mention the country's fall from grace to the bottom of the U.S.'s human trafficking league table.

I hope somebody in a position of authority makes a mental note to check out the accuracy of these optimistic predictions - and ensures the results are similarly publicised.

[tullynagardy]

"

Not to belabor some of the questionable points of the KResearch report, but NCPO's stimulus policies are financed by potentially unlimited government borrowing (

Exactly. What they are doing is the same unsustainable populist BS that got PTP into such trouble. This wrecklessness will push Thailand ever closer to the brink.

Sadly for colour cheerleaders on here because its their "team" doing the policies, and not Thaskin, all is ok.

[northernjohn]

this has to be the biggest load of bull ever ...LOOK AROUND people have no money and as for exports the weak baht will help but even china is having problems

but if there is no widespread violence [in Iraq] DO THESE PEOPLE WATCH THE NEWS

Well I agree the people seem to have no spending money and not being an economist I am not sure how domestic spending will do any thing other than put the average household debt into an even deeper hole.

As for the week Baht not sure what you are talking about. It seems to have been in the same position give and take both ways for 5 years. It is stronger than it was when I first came to Thailand 8 years ago. Every year after that it got stronger.

I like you have not got a clue as to widespread violence. Be more specific. Remember that is not a problem in Thailand. What has Iraq got to do with it?

Are you talking about the southern three provinces if that is what you are talking about I agree but for the rest of Thailand NOT.

You want wide spread violence I suggest that you move to Pakistan or certain areas in Chicago or Detroit. Sudan I hear is not a peaceful country either.

[northernjohn]

"Pimonwan Mahujchariyawong, deputy managing director at KResearch, said gross domestic product could expand 4.3 per cent in the second half. She said that would be the result of increased certainty in government spending policies, improved business sentiment from less political uncertainty, and the return of consumer confidence, which would raise domestic consumption".

"Could expand 4.3 per cent" . . . or not. What extraordinary crystal gazing, based entirely on the totally unjustified assumption of an upswing in public, consumer and business confidence over the next year.

No mention of all, for some inexplicable reason (loss of face?), of the hit Thai is certain to take in terms of tourist and trade revenue resulting from international condemnation of the recent coup and ongoing martial law - not to mention the country's fall from grace to the bottom of the U.S.'s human trafficking league table.

I hope somebody in a position of authority makes a mental note to check out the accuracy of these optimistic predictions - and ensures the results are similarly publicised.

"Could expand 4.3 per cent" . . . or not. What extraordinary crystal gazing, based entirely on the totally unjustified assumption of an upswing in public, consumer and business confidence over the next year."

Well they have only been in government for one month and it is appearing that things will improve. All ready the tourists are coming back. But you are rite it might be over optimistic based on just one month.

At the same time the one month is very promising. All ready foreign governments are backing down on condemnation of the coup. Just recently 40 different countries took Thailand off the travelers alert warning list. Now it is just because they can not justify the claims they made other than a minority of the voters wanted the PTP. They are seeing none of the things that they expected to see. In fact they are seeing Thailand as a safer place to travel in than it was under the PTP. Not saying it was bad under them. Just a few known places where there was demonstrations being held. NOT ALL OF Thailand. In fact even Bangkok where a lot of the violence was happening was safe to travel through most of.

If you had posted this when the PTP was in power I would be far more likely to agree with you.

[tullynagardy]

Well they have only been in government for one month and it is appearing that things will improve. All ready the tourists are coming back. But you are rite it might be over optimistic based on just one month.

At the same time the one month is very promising. All ready foreign governments are baking down on condemnation of the coup. Just recently 40 different countruies took Thailand off the travelers alert warning list. Now it is just because they can not justify the claims they made other than a minority of the voters wanted the PTP. They are seeing none of the things that they expected to see. In fact they are seeing Thailand as a safer place to travel in than it was under the PTP. Not saying it was bad under them. Just a few known places where there was demonstrations being held. nOT ALL OF Thailand. in fact Bangkok where a lot of the violence was happening was safe to travel through most of it.

If you had posted this when the PTP was in power I would be far more likely to agree with you.

First of all can i suggest a spell check before you reply? That post is barely readable and if Northern refers to the North of England then what a damning indictment of British education standards.

Secondly your statement "All ready [sic] foreign governments are baking [sic] down on condemnation of the coup" is just lies. Only yesterday the EU (which constitutes nearly a quarter of Thailands export market) put on hold the signing of an agreement to deepen political and business ties and cancelled all official trips.

Furthermore this report confirms they expect public spending to be the main source of economic growth this year, all financed through borrowed money. This is exactly the same irresponsible fiscal policy that PTP got slammed for, yet here you are supporting it.

The truely sad thing is you`re a hypocrite but don`t even understand why.

[Robby nz]

Well they have only been in government for one month and it is appearing that things will improve. All ready the tourists are coming back. But you are rite it might be over optimistic based on just one month.

At the same time the one month is very promising. All ready foreign governments are baking down on condemnation of the coup. Just recently 40 different countruies took Thailand off the travelers alert warning list. Now it is just because they can not justify the claims they made other than a minority of the voters wanted the PTP. They are seeing none of the things that they expected to see. In fact they are seeing Thailand as a safer place to travel in than it was under the PTP. Not saying it was bad under them. Just a few known places where there was demonstrations being held. nOT ALL OF Thailand. in fact Bangkok where a lot of the violence was happening was safe to travel through most of it.

If you had posted this when the PTP was in power I would be far more likely to agree with you.

First of all can i suggest a spell check before you reply? That post is barely readable and if Northern refers to the North of England then what a damning indictment of British education standards.

Secondly your statement "All ready [sic] foreign governments are baking [sic] down on condemnation of the coup" is just lies. Only yesterday the EU (which constitutes nearly a quarter of Thailands export market) put on hold the signing of an agreement to deepen political and business ties and cancelled all official trips.

Furthermore this report confirms they expect public spending to be the main source of economic growth this year, all financed through borrowed money. This is exactly the same irresponsible fiscal policy that PTP got slammed for, yet here you are supporting it.

The truely sad thing is you`re a hypocrite but don`t even understand why.

What a lovely load of insults.

Go check out international news and you will see that the EU has said that any sanctions will not include trade.

The infrastructure projects and other stimulation packages will be in 2 forms, first from the unspent portion of the 2014 budget, second from the normal 2015 budget which is at present estimated to have a deficit of 250 billion, which may or may not be borrowed. If it is, it will more than likely be through the issuing of bonds which is quite normal.

The rest will come from normal Government income.

Note no off budget borrowing.

The infrastructure projects, mainly rail, road and flood relief will put money into the economy and lead to more work for SME sub contractors and a higher tax take.

The anti corruption measures being put in place that have so far (in one month) led to so many resignations and moves to inactive posts will without a doubt in the coming months lead to lower contract prices as contractors will no longer have to pay large sums of tea money, a big plus for both the country and the contractors.

[tullynagardy]

What a lovely load of insults.

Go check out international news and you will see that the EU has said that any sanctions will not include trade.

The infrastructure projects and other stimulation packages will be in 2 forms, first from the unspent portion of the 2014 budget, second from the normal 2015 budget which is at present estimated to have a deficit of 250 billion, which may or may not be borrowed. If it is, it will more than likely be through the issuing of bonds which is quite normal.

The rest will come from normal Government income.

Note no off budget borrowing.

The infrastructure projects, mainly rail, road and flood relief will put money into the economy and lead to more work for SME sub contractors and a higher tax take.

The anti corruption measures being put in place that have so far (in one month) led to so many resignations and moves to inactive posts will without a doubt in the coming months lead to lower contract prices as contractors will no longer have to pay large sums of tea money, a big plus for both the country and the contractors.

Whats "off budget borrowing"? If they set a ridiculous budget then yeah its not off budget but its still ridiculous and fiscally irresponsible.

Since coming to power the junta have paid billions to famers, capped cooking-gas and diesel prices, approved handouts to the tourism industry and trebled an already unaffordable infrastucture budget. Its populism pure and simple, the same Thaskin and his ilk did for a decade but because its "your team" you feel obliged to support it when, judging by your comment, you have no idea the implications. Do you actually undertstand what "issueing bonds" even means?

If the dozen or so coups before didnt stop corruption why are you so naive to think this will?

Finally do you never get bored of the blind cheer leading? What are you trying to prove?

[rakman]

Why is it that economists think Government (any of them) spending can be counted as and increase to the GDP when that money comes from the private sector. The economists don't factor in how much this costs. Even as deficit spending, there is only a short burst of activity then the piper has to be paid and paid.

Think of taking a leaky bucket, pull water from the pool, then run down to the other end, spilling water along the way then dump the water back into the pool.

With the state of the world economies, this will not end well.

[tonbridgebrit]

Public spending to lead economic growth in H2, KResearch says
Erich Parpart
The Nation

BANGKOK: -- All four economic engines - consumer consumption, business investment, government spending and exports - will propel growth in the second half of the year, spearheaded by the public sector, said Kasikorn Research Centre.

Pimonwan Mahujchariyawong, deputy managing director at KResearch, said gross domestic product could expand 4.3 per cent in the second half. She said that would be the result of increased certainty in government spending policies, improved business sentiment from less political uncertainty, and the return of consumer confidence, which would raise domestic consumption.



(Right, in that case, let's have more public spending, gives even more economic growth.)