Thai Finance Ministry Warns of Budget Delay as Growth Target Cut
Thailand’s finance ministry cut its forecast for economic growth for the third time in as many months and said the failure to form a new government may delay approval of the budget until the second quarter of 2015.
The economy may expand 2.6 percent in 2014, compared with an earlier target of 3.1 percent, assuming that a new government is in place in the third quarter, said Somchai Sujjapongse, head of the ministry’s Fiscal Policy Office.
“If it is delayed more than that, the figures will be changed,” Somchai said at a media briefing in Bangkok today. “There is high uncertainty on political front.”
Prime Minister Yingluck Shinawatra’s administration has been stuck in caretaker mode since she dissolved parliament Dec. 9. The legislative gridlock may extend into the third quarter after the Constitutional Court annulled a Feb. 2 election and the nation’s Election Commission warned it may take at least three months to organize new polls.
“The public sector has become a drag on the economy this year because the government has no budget,” Somchai said. The Constitutional Court this month rejected a 2 trillion baht ($61 billion) infrastructure bill that parliament had approved, further reducing the government’s scope to stimulate growth.
Thailand’s SET Index (SET) of stocks fell 0.1 percent to 1,359.34 as of 3:15 p.m. in Bangkok. The gauge has gained 4.7 percent this year, lagging behind benchmarks in Indonesia, the Philippines and Vietnam. The baht was little changed.
Protests that began in late-October to oust Yingluck have shut down parts of Bangkok, sparked clashes that killed 23 people and disrupted an election, which was boycotted by the main opposition Democrat Party.
The Democrats haven’t said whether they will contest a new poll, and protest leader Suthep Thaugsuban has vowed to block any vote that is held before electoral rules are changed to blunt the dominance of parties linked to Yingluck’s brother, Thaksin Shinawatra, which have won the past five elections.
A prolonged political deadlock lasting into the second half of the year may prompt a reassessment of Thailand’s rating outlook, Fitch Ratings said last week.
“If our political problems can’t be settled soon, they may downgrade our outlook first,” Somchai said, adding that a six-month delay in the 2015 budget means spending won’t start until the second quarter of next year. “If it prolongs, they may move to cut our credit rating next year.”
Fitch and Moody’s Investors Service earlier this month kept their credit ratings for Thailand unchanged with a stable outlook, citing the strong economic fundamentals while warning of risks to the creditworthiness if the gridlock continues.
The central bank earlier this month cut its benchmark interest rate to the lowest level in more than three years to bolster growth, and reduced its forecast for economic expansion this year to 2.7 percent from 3 percent.
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