2014: World Bank “Cuts” Thai GDP to 2.5% & Investment application “Tanks” 42%

Local press reports Thailand’s economic growth would continue to slow this year and the outlook remains uncertain due to continued political tensions, while global growth is also lacking vigour, according to the World Bank.

The World Bank forecast for Thailand’s economic growth has been slashed to 2.5 per cent from 3 per cent in April, according to the semi-annual “Global Economic Prospects” report released on Tuesday. Growth is expected to pick up to 4.5 per cent next year and the following year.  “Recent political tensions have introduced some uncertainty to the outlook,” the report said.

In East Asia and the Pacific, growth is viewed at 7.1 per cent this and next year, before easing to 7 per cent in 2016.

For Thailand, air and ocean trade has so far largely been unaffected despite Thailand’s new military administration cracking down on protests in Bangkok and imposing curfews on truck movements.

“Generally there has been very little disruption to production facilities and the supply chains in Thailand and the same goes for Panalpina’s daily operations there,” said Henrik Jensen, Panalpina Country Manager for Thailand, based in Bangkok.

But analysts warn that the long-term economic implications of last month’s coup are more serious.

“Exporters expect that the NCPO will come up with strategies to support the manufacturing and trading sectors,” said Thai National Shippers Council (TNSC) chairman Nopporn Thepsithar.

He said the TNSC would maintain its projection of 3% export growth this year, lower than the government’s projection of 3.5%.

Rajiv Biswas, Asia-Pacific Chief Economist at IHS, said although the coup had brought the illusion of temporary stability, it had not addressed the fundamental political schisms that divide Thailand or removed the risk of a new round of escalating violence.

“The lack of any roadmap to reconciliation between the two sides keeps the nation on the brink of civil unrest,” he told Lloyd’s Loading List.com.

“Some large foreign investors have already been saying that they are very concerned at the political turmoil and lack of any democratic political solution. “Several large Japanese manufacturing firms have announced that they are considering putting large new investment plans for Thailand on hold until the political situation stabilises.”

According to the World Bank, Outside of China, regional growth would slow somewhat this year due to the tightening of domestic policies and the political tensions.

“A projected acceleration of growth in the Philippines in 2015 reflects accelerated reconstruction efforts. Overall, aggregate growth for the region, excluding China, is projected to settle at around 5.5 per cent by 2016 as external demand solidifies, the domestic adjustment process comes to an end and Thailand recovers from political crisis. In particular, growth in the Asean-4 is projected to track potential output.”

Vietnam would continue to benefit from recovering global demand due to improved macroeconomic fundamentals, including improved price stability, with GDP growth expected to increase modestly, but steadily to reach 5.8 per cent by 2016.

In Indonesia, growth will ease to 5.3 per cent this year as the economy adjusts to tighter financing conditions, before stabilising at 5.6 per cent in the next two years on the back of recovering exports.

This year marks the third straight year for developing economies to expand by less than 5 per cent, a factor that has contributed to rising debt-to-GDP ratios that could make those economies more vulnerable, Andrew Burns, the report’s lead author, told Reuters.

“Although the situation in developing countries is pretty good … it isn’t the kind of growth they’re going to need if they’re going to make the very solid inroads into poverty that we’re hoping,” he said.

The global growth forecast was trimmed due to a confluence of events, from the Ukraine crisis to unusually cold weather in the United States, which dampened economic expansion in the first half of the year.

The poverty-fighting institution predicted the world economy would grow 2.8 per cent this year, below its January forecast of 3.2 per cent, but expressed confidence that activity was already shifting to more solid footing.

Tensions between Ukraine and Russia hit confidence worldwide. The bank also cut its growth forecast for the United States to 2.1 per cent from 2.8 per cent to account for the weather at the start of the year. The US economy contracted for the first time in three years in the first quarter, but it already appears to be rebounding.

The global growth forecasts for the next two years remain unchanged at 3.4 per cent and 3.5 per cent.

Moodys, the credit rating agency, recently gave a 1 to 2 years stable out-look for Thailand, despite the coup, saying, however, growth will continue to be weak as investments have been hurt by the political crisis, including the coup. There is a great back-log of investment promotion application in Thailand, held up because the Yingluck’s government can not function. The investments is in the US$ billions and also the junta said many infrastructure and anti-flood works planned by the Yingluck government would be implemented. Yet, most noted, with Thailand’s long-political crisis and little hope to resolve the crisis, long-term confidence in Thailand have fallen greatly, hutrting, long-term investments.

Investment Applications Down 42% in Thailand (source)

BANGKOK (DPA) — Planned investment projects decreased by 42 per cent in value year-on-year during Thailand’s first five politically tempestuous months of 2014, reports said Wednesday.

Board of Investment data showed applications for 515 projects worth 9.5 billion dollars, down 39 per cent and 42 per cent, respectively, from the same period last year, the Bangkok Post reported.

Thailand has been in the grip of a political crisis this year with nearly daily anti-government street protests in Bangkok, a disrupted general election in February and increasingly violent confrontations culminating in a coup d’etat on May 22.

The country’s export-reliant economy is no stranger to crises, having endured nearly six years of political turbulence, street protests and the devastating floods of 2011.

“I think Thailand is very resilient,” said Yeap Swee Chuan, chairman of the Malaysian-Thai Chamber of Commerce and president of AAPICO Hitech Company, an automotive parts manufacturer.

Chuan’s factory in Ayutthaya province was under water for two months in 2011.

“But we recovered in 60 days,” Chuan told a press conference Tuesday.

Thailand’s automobile sector has been a major draw for foreign investment, and attracted 122 new projects worth 164 billion baht in the first five months of the year.

“Whatever changes take place in Thailand there is an infrastructure that allows things to continue,” Chuan said. “For my industry we are absolutely confident.”

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