Thailand cuts growth outlook

by **Cals** Sat 28 Sep 2013, 18:25

Published: Saturday September 28, 2013 MYT 12:00:00 AM
Updated: Saturday September 28, 2013 MYT 11:23:57 AM
Thailand cuts growth outlook

BANGKOK: Thailand cut its growth outlook this year and said policy would stay supportive as poor manufacturing output suggested South-East Asia’s second-largest economy may struggle to emerge from recession.
The fifth straight month of contraction in manufacturing output, worst than the market had expected, has fanned debate on when the economy can pull out of a downturn.
Thailand is grappling with a current account deficit and capital outflow pressures ahead of a tapering in US monetary stimulus. Thailand’s finance ministry yesterday cut the outlook on growth for 2013 to 3.7% from 4.5% projected in June due to weak exports and slower domestic demand.
“The MPC (monetary policy committee) is expected to keep the policy rate on hold until next year to support economic growth,” the ministry’s fiscal policy office chief,Somchai Sajjapong, told a news conference. “But next year, there is a chance that the rate will go higher if inflationary pressure picks up,” he said.
Exports were estimated to increase just 1.8% in 2013, which would result in a trade surplus of US$4.9bil and a current account surplus of US$1.3bil, he said. On Aug. 21, the MPC left the benchmark rate at 2.5% for a second straight meeting, saying that was appropriate for the economy to gain momentum. It next reviews policy on Oct 16, and most economists expect no change.
Weakness in exports and slowing domestic demand pulled Thailand into a mild recession in the second quarter, as South-East Asia’s second-largest economy shrank on a quarterly basis in each of the first two quarters.
Some analysts expect Thailand’s fortunes to improve at the year-end and the government has said the third quarter would see positive quarter-on-quarter growth.
“The outlook should be positive, judging from improvement in international countries which should support the export and industrial sectors,” said Pimonwan Mahujchariyawong, an economist at Kasikorn Research Centre, adding that output should improve in the final quarter of the year.
Thai authorities have said the economy should pull out of recession, believing shipments will rebound in the final months of the year, usually the country’s export season.
“Looking ahead, fundamentals of the economy remain sound overall. Monetary and fiscal conditions will continue to be supportive,” Bank of Thailand governor Prasarn Trairatvorakul told a conference yesterday. — Reuters