Siam Commercial Bank upbeat about GDP in 2014


Siam Commercial Bank upbeat about GDP in 2014

The Siam Commercial Bank’s Economic Intelligence Center (EIC) believes Thailand will see a 4.5 percent growth in Gross Domestic Product (GDP) in 2014.

The EIC is the research arm of the SCB and its chief economist suggested the reasons for the optimism are based on exports picking up and the injection of funds from the government in infrastructure projects.

In some ways this projection mirrors that of other economists and regional pundits, although recent political action from the parliamentary opposition suggests the infrastructure bills could be forced to go before the courts to determine their legality.

The EIC had previously suggested Thailand’s GDP for 2013 would be around four percent, but this was downgraded to 3.4 percent on the back of negative data.

That said, the EIC’s growth forecast is 0.3 percent less for 2014 than that predicted by the central bank, which believes the economy can grow by 4.8 percent. So, the conservatism exhibited by the EIC is probably to be welcomed, especially as some other economists believe Thailand could grow by as much as five percent next year.

The EIC noted that public spending in 2014 is predicted to be around 476 billion baht, a rise of 14 percent on 2013.

Of course this expected rise is largely dependent on the 350-billion-baht water management plan and the 2-trillion-baht infrastructure budget, the latter, as mentioned, possibly to come under scrutiny by the courts.

At the time of writing, the water management budget is also stalled by the courts as the government is being required to conduct public hearings and environmental impact assessments before any kind of construction works are allowed to begin.

That said, as of the beginning of December, 29 of the 53 planned water projects have passed their environmental tests.

The EIC feel exports will be the catalyst for boosting economic growth in 2014, predicting a substantial eight percent growth compared to the very flat 1.5 percent witnessed this year.

As they noted, Thai exports to China and Europe are improving and shipments to ASEAN neighbours like Cambodia, Laos, Vietnam, and Myanmar are also on the surge.

As far as the currency is concerned, the EIC expects the baht will continue to trade around the 31-baht mark to the US dollar for the remainder of the year but may depreciate slightly into 2014.

They expect the Bank of Thailand to hold its 2.5 percent policy rate for the next 12 months due to limited inflationary pressure.

The only area of external concern is if the United States Federal Reserve begins its expected quantitative easing, and this could heavily impact foreign capital flows in Thailand. This would lead to higher financial costs for local businesses.