FPO: economy expected to recover with Emergency Decree revoked

The Director General of the Fiscal Policy Office (FPO) has voiced his confidence that the recent lifting of the Emergency Decree will most likely attract more tourists to the nation.
According to Somchai Sajjapong, the nation’s private investment is currently lacking and the government’s ability to disburse budget funds is still limited.
In addition to the export sector, the sole driving force left since political conflicts erupted last November, the tourism sector will contribute to the nation’s economic recovery once it fully recovers.
About 50 countries have issued warnings to their citizens against traveling to Thailand as the political turmoil escalated to its peak earlier this year. As a result, Thailand lost 4.5 million tourists during the first 2 months of 2014, he said, adding the majority of them are Hong Kong visitors.
If the political crisis continues till the end of this year, the nation’s GDP growth will be under 3%, added Somchai. (NNT)

Thailand back to world’s No 1 rice exporter

Thailand has reclaimed its title as the world’s top rice exporter after having shipped out 1.5 million tonnes of grain in the last two months, according to an international trade company.
Sumet Laomoraporn, Chief Executive Officer of CP Intertrade Co, said Thailand’s rice export in January-February was higher than two closest competitors - India which exported 1 million tonnes and Vietnam 800,000 tonnes.
The United States has predicted Thailand will surge back to world’s No 1 rice exporter this year given higher quality of rice and declining prices, he said, adding that Thailand will possibly export 8.5 million tonnes of rice this year.
He said global rice prices are approaching the lowest level with 5 percent rice sold at US$400/tonne. He said prices will fall to US$360-380/tonne during March and April, which is the harvest season in major rice producing countries, including Vietnam and India.
Rice prices will surge higher in the second half of the year as buyers import rice to be stocked and the El Nino phenomenon will affect rice production in the third quarter, pushing up grain prices, he said.
Sumet said the termination of the government’s rice pledging scheme has pushed down the rice price to Bt7,000/tonne, resulting in declining prices of packaged rice.
The price of packaged rice has been 10 percent lower since early this year and is on a declining trend, he said. (MCOT)

BoT cuts GDP growth as court rules disrupted poll invalid

The Bank of Thailand (BoT) has cut the country’s gross domestic product (GDP) forecast for the year to 2.7 percent from 3 percent after Thailand’s Constitutional Court ruled that a general election held in February was invalid.

According to Assistant BoT Governor Paiboon Kittisrikangwan, the court verdict was not among the factors influencing the latest GDP forecast in October last year. Not only a GDP cut to 2.7 percent, but Paiboon said that ongoing political instability and the delay of the new government formation will likely result in lower domestic consumption as well as a decline in new investments by 0.5 percent.
Meanwhile, the national budget allocation for the 2014 fiscal year will likely be delayed for a quarter due to the dissolution of the lower house of Parliament. Investments in infrastructure and water-management projects will expand only at 2.5 percent, accounting for Bt17 billion and Bt12 billion respectively.
Thai exports, however, are projected to grow 4.5 percent this year following the global recovery, while imports would grow 1.1 percent. Prolonged political instability to the latter half of 2014 may lead to lower tourism confidence and regional growth.
The central bank also foresees 4.8 percent growth in 2015 due to the rise of planned infrastructure development investment. Private investments are expected to grow 10.2 percent, while state investment would grow 2.5 percent.
Export figures in 2015 are set to rise 7.7 percent, while next year imports would rise 9.1 percent following a boost of domestic consumption and investments.
The bank expected the rise in inflation to 2.5 percent this year following the recent revision of liquefied petroleum gas (LPG) price but it is not too worrisome as inflation is expected to be only 2.3 percent next year.
Paiboon also said he believes that the Monetary Policy Committee’s recent decision to cut its benchmark interest rate by 0.25 percentage points to 2 percent will help lessen household debt and boost the overall economy. (MCOT)

Commerce Ministry: lowered benchmark rate will affect inflation

The Commerce Ministry anticipates that the recently lowered interest rate announced by the Monetary Policy Office could increase the nation’s inflation rate by 0.0025% while expressing confidence that Thailand’s economy would still grow 2 to 2.8%.
The Director General of the Ministry’s Office of Trade Policy and Strategy, Ampawan Pichalai, stated that at the MPO’s adjusted rate, economic growth is likely, as the lowered benchmark rate should stimulate public spending and encourage investment in the short term. She cited the inflation rate as worth monitoring but that it should not affect local economic growth.
Ms. Ampawan quoted her office’s report that the modified interest rate would also slightly relieve the burden of household debt, while noting threats to good economic performance are drought and fuel prices.
However, if public spending and private sector investment are still lackluster, the MPO might again adjust the benchmark rate downwards, later this year. (NNT)

Fed downsizes QE, Thai baht weakens

The US Federal Reserve has decided to cut its quantitative easing (QE) volume by US$10 billion, effective in April - a move that consequently weakens the baht, a senior central bank official said today.
Roong Mallikamas, Bank of Thailand spokesperson, said the Fed’s QE reduction to US$55 billion a month was predictable and it will pose only a slight impact on the global money market.
The US dollar has significantly strengthened against other currencies while the baht weakened to Bt32.33-32.35 against the dollar - a decline in line with other currencies in the region.
The Fed’s statement has signaled a policy interest rate adjustment after the QE termination, and interest rates will possibly be higher in the second quarter of next year.
Dr Roong said that the global interest rates are on a rising trend, contributing to funds flowing back to the US dollar in the short term.
She said the Fed’s decision to downsize QE indicated a strengthening US economy - a positive sign for the global and Thai economies.
Thailand’s economic growth has plunged to less than 3 percent which is far below the potential growth of 4-5 percent, mainly due to disappointing consumption and investment given the months-long political turmoil.
She said the investment sector will have to introduce new manufacturing technology to keep pace with advanced global technology, or it would lose its opportunity.
The central bank needs to continue a relaxed money policy to stimulate the economy, she said. (MCOT)