BANGKOK: Thailand’s finance ministry on Tuesday cut its economic growth forecast for the third time this year as a poor performance from the export sector slowed expansion in the trade-dependent economy. The government of Prime Minister Prayuth Chan-ocha is coming under increasing public pressure to deal with the country’s stubbornly weak economy. Prayuth hinted on Monday at a cabinet change in September.
The finance ministry now expects Southeast Asia’s second-largest economy to grow 3.0 percent this year, down from the 3.7 percent forecast three months ago. A year ago, shortly after Prayuth led a military coup, the ministry forecast 5.0 percent growth for 2015. Since then, growth targets have been steadily cut due to weak external markets for Thai exports and slow demand at home as Thai consumers try to pay down record household debt.
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Monetary authorities have focused in recent months on weakening the Thai baht in an attempt to provide a boost to exports, worth around two-thirds of the economy. But a weaker currency has yet to stimulate shipments. Thailand now expects exports to shrink 4.0 percent this year instead of rising 0.2 percent, Krisada Chinavicharana, director-general of the Fiscal Policy Office, said. “Despite falling exports, clearer public investment in the second half and stronger-than-expected growth in tourism will help drive economic growth to 3 percent this year,” he said.
But Credit Suisse economist Santitarn Sathirathai said 3 percent growth “will likely be difficult to achieve”, as drought and declining industrial output could impact expansion. Last week, he cut his growth estimate to 2.5 percent from 3.1 percent. Earlier on Tuesday, the Industry Ministry said annual factory output in June fell 8 percent, worse than a Reuters poll forecast of 5.15 percent and the biggest drop since March 2014.
Data on Monday showed June exports fell at the steepest rate in more than three years. Deputy Prime Minister Pridiyathorn Devakula said on Tuesday a weaker baht would boost exports in the final quarter. Credit Suisse’s Santitarn said he sees “significant risk” that April-June will show an on-quarter contraction. He expects the Bank of Thailand to cut rates again as well as keep steering the baht lower.
Official second-quarter GDP data is due on August 17. In January-March, the economy expanded 0.3 percent on the quarter and 3.0 percent on the year. Thailand’s monetary policy committee is expected to keep the benchmark rate unchanged at 1.5 percent when it meets on August 5. It made surprise cuts in March and April to try to lift growth.
