Exports, govt spending key to lifting economy out of doldrums, experts say

Exports, govt spending key to lifting economy out of doldrums, experts say
Erich Parpart

Phatra Capital director Supavud Saicheua, second right, urges the government to postpone hiking value-added tax next year. Other panellists at the

Phatra Capital director Supavud Saicheua, second right, urges the government to postpone hiking value-added tax next year. Other panellists at the
Some economists say they are disappointed with the state of the economy and warn that the country will continue to depend largely on exports next year.
They also said yesterday that there needed to be greater clarity on the government's infrastructure spending if the Kingdom wanted to see more private-sector investment.

Merchandise and services exports, which account for 70 per cent of the country's gross domestic product, should return to positive expansion in 2015 after posting flat growth this year, they believe.

But they said the country could not rely on external demand only, and the private sector was screaming for more clarity in the government's investment plans in order to gain more confidence heading into the new year.

"The outcome of the economy this year has upset many people, since its expansion will be less than 1 per cent. And the recent recovery of the Thai economy was largely due to the recovery of the export sector and not because of government spending," Phatra Capital director Supavud Saicheua said at the "Thailand Economic Outlook 2015" seminar arranged by Krungthep Turakij newspaper and Now 26 channel.

Supavud predicted GDP would expand by 3.7 per cent next year if merchandise exports grew by 3 per cent.

He believes that the export sector will recover as the global economy gets back on track, led by the United States, but government spending is still needed.

"Apart from exports, Thailand's economy next year will expand as a result of government investment and the acceleration of the budget disbursement in the last quarter of this year and the first quarter of 2015. If all goes according to plan, government spending will boost private-sector confidence."

Supavud said all eyes should be fixed on the second quarter of next year as Thailand's economy usually slows during that period. Drought is often a problem around that time, and a new constitution is slated to be released that quarter.

He said external risks from the divergence of major economies' monetary policies and political situations abroad were other factors investors should keep an eye on. They included the election in Britain and the possibility of the United Kingdom breaking away from the European Union, Spain's election, and Catalonia's ongoing quest for nationhood.

He urged the government to delay increasing the value-added tax until the end of next year as it could affect the growth of the economy because of a slowdown in consumption, as happened in Japan.

Ekniti Nitithanprapas, deputy director-general of the Fiscal Policy Office, said the economy expanding less than 2 per cent on average over two years "is never satisfactory for this country".

He urged the government to be clearer on the timeline for its investment plans and to speed up the tendering process for its infrastructure projects, which were crucial to improving the confidence of private investors.

"Government spending of only around 6 per cent of GDP is in a different league from what exports can do - at 70 per cent - but it is still important because it can boost private-sector confidence and it can help with the country's long-term economic growth," he said.

Ekniti added that only 20 per cent of the 2015 fiscal budget - or Bt2.575 trillion - had been disbursed by the government in the past two months after a target of 35 per cent was set.

He said more effort should be made to accelerate disbursement while the current global environment of low interest rates presented a good opportunity for the government to borrow for investments.

Visit Ongpipattanakul, managing director of Trinity Securities, said most economies around the world would continue to fight possible deflation next year as a result of lower oil prices. Meanwhile a high level of liquidity would continue due to the expected introduction of Japan's first round and Europe's second round of quantitative easing.

Visit expects the SET Index to go beyond 1,600 points in 2015 as the prospects of the Thai and world economies were looking better.

However, he warned that a spillover effect from the contraction of Russia's economy due to sanctions coupled with lower oil prices was another possible risk for the world economy.

This was because many commercial banks in the US and the EU had investments in Russian bonds and a broken-down of Russian economy could possibly trigger a situation similar to the global financial crisis in the late 2000s that began in the US.

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