Thailand Cuts 2014 Growth Forecast for Second Time in a Month
Thailand’s finance ministry lowered its 2014 economic growth forecast for the second time in a month, while Moody’s Investors Service said political protests will weigh on the nation’s expansion.
Gross domestic product may grow 3.1 percent in 2014, Somchai Sujjapongse, head of the finance ministry’s Fiscal Policy Office, told reporters today. The ministry had lowered the forecast to 4 percent from 5.1 percent on Dec. 26.
Thailand has seen more than two months of anti-government protests aimed at erasing the influence of Prime Minister Yingluck Shinawatra and that of her brother Thaksin, who was ousted as premier in a 2006 coup. Protest leader Suthep Thaugsuban, a former member of the opposition Democrat Party, has said protests will continue until Yingluck steps aside and an unelected council is installed in her place.
“A key credit-negative feature for the sovereign is the prolonged political protests, which will weigh on an already fragile growth outlook for 2014,” Moody’s said in a statement today. “Heightened political tensions have marred investor confidence.”
Goldman Sachs Group Inc. (GS) also lowered its forecast for Thai GDP growth this year to 3.6 percent from 4.2 percent, citing increased political uncertainty. The bank expects an interest-rate cut by the central bank this quarter, and a “slightly weaker” baht in the near term, analysts including Andrew Tilton wrote in a note today.
The baht, which touched the lowest level since 2010 on Jan. 6, was little changed at 32.89 against the dollar at 2:49 p.m. in Bangkok.
The Bank of Thailand is scheduled to announce its next rate decision on Jan. 22. Six of seven economists surveyed by Bloomberg expect the benchmark to be cut by a quarter of a percentage point to 2 percent, with one predicting no change.
Yingluck said yesterday a snap election set for Feb. 2 will proceed even as protesters continued a blockade of central Bangkok. The Election Commission has urged the government to defer the vote until April or May, saying the political environment is too tense to proceed next month.
The protests have hurt the economy and any delay in setting up a new government will dent public and private investment, Finance Minister Kittiratt Na-Ranong told reporters today. Concern about political unrest has caused the baht to weaken and increased capital volatility, he said.
The finance ministry cut its growth forecast because of delays in 2 trillion baht ($60.8 billion) of infrastructure projects and other state investments, according to Somchai. Thai GDP may grow less than 3 percent if the election is postponed, and there are about 45 billion baht of investment projects that need approval from the new government, he said.
Demonstrators initially took to the streets in late October to oppose a proposed amnesty law that they said would benefit Yingluck’s brother, which the government later abandoned. The demonstrations then morphed into a broader movement to erase Thaksin’s political influence.
Thaksin’s allies have won the past five elections, including two since his ouster, on support from rural northern and northeastern regions. The protesters, mostly middle-class Bangkokians and Democrat Party supporters from southern provinces, say Yingluck’s government is illegitimate and run from abroad by Thaksin, who faces a two-year jail term for corruption if he returns in a case he says was politically motivated.
Yingluck has refused demands from the demonstrators to resign, arguing that the almost 16 million people who voted for her in 2011 deserve a say in the nation’s future. Clashes have left eight people dead and hundreds injured.
“Many people have started to suffer,” Foreign Minister Surapong Tovichakchaikul, who is overseeing the government’s response to the demonstrations, said in a televised speech today. “It is making it more difficult for them to earn money, which is affecting the household economy.”
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