SCB: Long rallies risk harming GDP

Prolonged anti-government protests could disrupt the formation of a new government and the country’s investment climate, trimming 2014 economic growth to only 2.4%, the Siam Commercial Bank (SCB) said on Wednesday.

SCB Economic Intelligence Centre projected that the country’s gross domestic product (GDP) would grow by around 3% this year.

But if the rally by the People’s Democratic Reform Committee (PDRC) is prolonged until the second half of the year, it might delay the formation of a new government with full authority to manage the country. GDP growth for the year would expand by only 2.4% as a result, the centre said.

It is clear that ongoing political turmoil had affected the government investment sector because it has delayed the disbursement of state budgets and government investment in infrastructure development megaprojects. Political uncertainty has also worsened the slowdown in private consumption and investment, the centre added.

According to the centre, the export sector will be a key economic driver in 2014, with an expected export expansion of 6% on the back of global economic recovery, particularly in the US, which would help offset the slowdown in domestic demand.

The centre said there is a possibility that the central bank’s key policy rate would be lowered to 1.75% in the first half of the year, to enhance economic recovery at a time when there is no fiscal measure to stimulate economy and inflation pressure is low.

It also projected the baht would move between 32 and 35 baht to the US dollar this year, due to the impact of political turbulence and the US Federal Reserve scaling down its quantitative easing measures.

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