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[ 2014-12-21 ]

Thailand's growth to stay below potential in 2015, predicts ADB

Development bank's president says GDP to grow only 1 per cent this year

The Asian Development Bank (ADB) said it now expected Thailand's economy this year to grow by 1 per cent, lower than the 1.4-1.5 per cent previously expected, while growth in 2015 is expected at 4 per cent, lower than the 4.5 per cent forecast in September.

The bank, however, said Thailand had the potential to expand by 5 per cent yearly, and to facilitate the process the ADB president yesterday offered some recommendations to the current military-led government.

Meanwhile, though exports this year are believed to have grown, the expansion is expected to be less than 1 per cent, lower than the previously projected 1-2 per cent. Export growth next year is expected at 3-4 per cent, lower than the previous projection of 5-6 per cent, as a result of the uncertain European recovery caused by the geopolitical risks involving Russia, along with the political situation in Japan and low agricultural prices, which could fall further. 

The ADB has, since 1966, provided around US$6.4 billion worth of financial loans, grants and technical assistance to Thailand.

ADB president Takehiko Nakao told the press after a meeting with Prime Minister General Prayut Chan-o-cha, Finance Minister Sommai Phasee, and Bank of Thailand Governor Prasarn Trairatvorakul that the Thai economic outlook was encouraging heading into next year. 

There is stability in the financial system in terms of the exchange rate and the high foreign exchange reserves.

"ADB is expecting Thailand to grow by 1 per cent this year [as] it is starting to recover from previous difficulties, and ADB is expecting 4-per-cent growth next year. I believe Thailand's economy can grow even more, and the potential growth rate should be more than 5 per cent if the country increases its cooperation and connectivity with neighbouring countries. I have discussed this issue with all three leaders, including the prime minister," he said.

Thailand can grow more strongly because of its strategic location in the Greater Mekong Subregion (GMS). Myanmar is starting to communicate with the international community and has provided a lot of opportunity to Thailand, which has rich resources in agriculture and tourism, along with a well-diversified industrial base, including the auto industry, Nakao said.

However, Thailand still faces challenges. 

One of the main issues is to elevate the quality of secondary, technical and vocational education to promote research and development and supply the labour market with a higher-quality and skilled workforce, as the country is ageing with a low birth rate. This has led to a shortage of labour, both skilled and unskilled, he said.

According to the ADB, Thailand is the second-most-aged society in Asean after Singapore.

Luxmon Attapich, ADB senior country economist, said a slowdown in the global economic recovery and low crops prices - which will continue into next year - had affected the bank's projection for Thailand's exports next year. 

That is one of the reasons the development bank had lowered the projection for expansion of the country's gross domestic product in 2015.

Other risks to the economy next year would be the uncertain recovery of domestic consumption, which was still weak in the third quarter of this year, while high household debt would be a constraint for domestic consumption. Government spending could also be delayed as some investment plans are still not clear.

Nevertheless, government spending will still be the main driver for the economy along with an increase in private investment and exports.
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