Prof Somjai Phagaphasvivat of Thammasat University’s political science faculty said exports are the main driver of growth this year, with an increase of 5-6% expected on the back of the economic recovery of China, Europe, Japan and the US.
However, there is a possibility that this year’s export target might be lower than the 5-6% forecast in case the Chinese economy grows below 7.5% as expected by China’s National People’s Congress, he said.
Thailand’s 2014 gross domestic product (GDP) growth is expected to be between 2.5% and 3% thanks to rising exports, but this also depends on whether political tensions escalate into further confrontation and violence coupled with a risk of China’s economic slowdown, said Prof Somjai.
He said lower-than-expected growth of China’s economy and Thailand’s current account deficit are the main risks to the country’s economic growth this year.
Foreign investment capital could leave the country’s financial market if a massive current account deficit is registered.
As the ongoing political impasse has deferred budget disbursement next year, public consumption is projected to contract by 6-7% and may fall below 10% if the political situation deteriorates further, said Prof Somjai.
The economy is not expected to grow substantially even if a functional government is in place, as the country still lacks competitiveness in terms of education and innovation despite its progress in infrastructure development, he said.
Prof Somjai said the government should also adjust its fiscal policy structure to enhance fiscal stability and facilitate development in education.
The Bank of Thailand’s relaxed monetary policy is not expected to support greater investment since investor confidence has eroded due concerns about political stability as opposed to the nature of the central bank’s policy interest rate, he said.
The ongoing political impasse has also dampened the tourism industry.
Last month, the number of tourists travelling through Suvarnnabhumi airport dropped by 18% compared with growth of 0.1% in January.
Krisada Chinavicharana, a financial policy adviser at the Finance Ministry’s Fiscal Policy Office (FPO), expressed concern over the ongoing political turmoil in the country.
The number of foreign tourists is likely to drop by 3 million if the political turmoil lasts much longer, she said.
The FPO is set to revise down this year’s economic growth projection, as the ailing tourism industry is taking a toll on the country’s economy.
At the start of the year, the Tourism and Sports Ministry forecast there would be 30.3 million tourists in 2014, up by 13.3% from last year, for revenue of 1.34 trillion baht, up by 15%.
Meanwhile, revenue generated by the tourism industry is crucial to the country’s economy, representing 11% of GDP.
“The FPO is likely to revise down the country’s economic growth this month from the last revision of 3.1%, lower than the earlier projection made last year at 3.5% to 4.5%,” Mr Krisada said.
It is closely monitoring financial institutions’ non-performing loans (NPLs) to see if the figures have increased.
NPLs are an important reflection of the country’s economy.
Although the figures of substandard debts of those over three months have not yet risen, those less than three months have had a tendency to increase.
The recent figures released by the Bank of Thailand showed that in 2013, the number of outstanding loans overdue by more than 90 days was 2.2% of overall loans, down from 2.3% in 2012.
But “special mention” loans, defined as overdue for 30-90 days, rose to 296 billion baht last year or 2.4% of the total compared with 2.2% in 2012.
Meanwhile, bad debts from personal and automobile loans were the highest in the category.
Earlier, the FPO commented that the country’s economy should be able to continue to expand if a new government could be installed this month or at least no later than July.
And the country should continue to grow by about 3% but without the 2-trillion-baht infrastructure project.