BANGKOK – Thailand’s economy is still stuck in first gear nearly six months after the army overthrew the government to end months of turmoil, with demand at home and abroad stubbornly weak and big government projects unlikely to bear fruit until next year.
A spate of poor economic data, including the government’s economic downgrade on Thursday, is an uncomfortable reminder to the junta at a time when expectations are running high. When it seized power in May, the army said it needed to restore order, kick-start growth and “return happiness to the Thai people”.
A week after the coup, economists had rushed to raise their estimates with hopes high that army rulers would turn the economy around. But the positive sentiment is fading as economic indicators have mostly disappointed and consumer confidence last month slipped for the first time since the coup.
While trade figures surprised by rebounding in September in a rare bit of good news, the details were not so encouraging.
Thailand’s Finance Ministry on Thursday cut its forecast for the country’s economic-growth rate this year to 1.4%, down from its previous 2% estimate.
The ministry said weak exports and a decline in tourist arrivals had hit the country’s economy, which had been showing signs of rebound after months of political crisis rattled investors and depressed consumption and tourism ahead of the May 22 military coup.
Exports, which have mostly been down this year, are estimated to grow just 0.1% this year due to weak demand from Europe—Thailand’s major trade market.
Export prices of agriculture products are also low, said Krisda Chinavicharana, director-general of the ministry’s Fiscal Policy Office.
The price of Thai rice has lagged behind its Vietnamese rival after the price support program, introduced by the previous administration, expired in February. Rubber price have also fallen about 30% this year. Thailand is the world’s second largest rice exporter after India and the top producer and exporter of natural rubber.
However, Thailand’s economy is set to improve in the second half of this year, Mr. Krisda said, with 2.9% growth projected, as more stable political climate boosts tourism confidence, private consumption and investment.
The government’s recent stimulus measures and increased government spending—including state investments to upgrade the country’s roads, rails and ports—are expected to encourage growth in the last three months and into next year, he said.
However, some economists said they remain cautious about the government’s growth outlook, due mainly to weak investment and an unfavorable external environment, which could hamper the country’s exports.
While the government’s short-term stimulus could revive consumption and investment, the government still lacks policies to bolster economic expansion in the medium-term or next year, said Tim Leelahaphan, a Bangkok-based economist at Maybank Kim Eng.
The ministry expects to see 4.1% growth in 2015, compared with a 4.8% target posited by the Bank of Thailand.
By Warangkana Chomchuen