BANGKOK– The Bank of Thailand joined the Finance Ministry and International Monetary Fund in cutting the country’s economic growth forecasts for this year, a reflection of how slow global demand is hitting Asia’s export-oriented economies.
In its quarterly report Friday, the Thai central bank lowered its gross domestic product forecast for 2013 to 4.2%, from a 5.1% forecast issued just three months ago.
“The main factor that led us to predict a significantly slower growth is the Asian economic condition, particularly the Chinese economy, which has been and will be affecting Thai exports and the industrial sector,” Assistant Gov. Paiboon Kittisrikangwan said at a news briefing.
In addition, he said, “domestic consumption has started to slow down after the boost from the government stimulus measures wound down at the end of the first quarter, which was sooner than expected.”
Thai markets took the news in stride. The dollar closed slightly weaker on the day against the baht, at 31.06 baht per dollar, while the Stock Exchange of Thailand index finished 0.36% lower at 1,481.84 points.
The BOT’s lowered forecast reflects the trend around Asia, which has been hit by a combination of weak demand from the West and slower growth in China.
Earlier this month the World Bank cut its forecast for Indonesian growth, for example, while authorities in Singapore and Taiwan — two other economies that depend heavily on global demand — also lowered their sights.
In June, Thailand’s Finance Ministry cut its 2013 GDP estimate from 4.8% to 4.5%, citing slowing economic growth and a sluggish recovery in the U.S., Japan and E.U., Thailand’s main trading partners.
The International Monetary Fund last month presented a forecast of 4.75% growth for Thailand this year. At the time, BOT Gov. Prasarn Traivoratkul told The Wall Street Journal that the BOT’s reduced target, still being formulated, was likely to be “in the same ballpark” as the IMF’s, but in fact it turned out to be significantly lower.
Further delays in spending on the government’s 350 billion baht ($11.3 billion) water management project also contributed to the cut, the BOT said.
Thanomsri Fongarunrung, an economist at Phatra Securities PCL, said the reduction “seems temporary, and there is no worrying implication for 2014.”
Indeed, the BOT maintained its forecast of 5.0% growth for next year, saying sound fundamentals should help bring the economy back to a normal growth pace.
The cut is in line with disappointing data from the first quarter of the year, when Thailand’s economy contracted 2.2% from the previous three months in seasonally adjusted terms. It expanded 5.3% on-year in the first quarter. Second-quarter GDP data is due out in mid-August.
The BOT cut interest rates by a quarter-percentage point in late May, citing the weakening economy. It held rates this month, and there’s little prospect of further cuts on the horizon.
“With household debt on the rise and continued growth in lending, a lower benchmark rate will not likely help much,” Mr. Paiboon said.
The central bank also lowered its forecast for export growth this year to 4.0% from 7.5%, and for import growth to 5.5% from 8.7%.
It trimmed its 2014 export and import growth forecasts to 8.0% and 8.5%, respectively, from 10.0% and 10.3%.
The bank revised down its 2013 targets for core and headline inflation to 1.1% and 2.3%, from earlier projections of 1.6% and 2.7%, respectively, due to reduced demand and cost pressures.