THAILAND - The Bank of Thailand is concerned that 2014 economic growth could be lower than last year if a new government cannot be formed by the third quarter, while tourism has suffered an adverse impact from the political protests in Bangkok that started in November.
Don Nakornthab, director of the central bank's Macroeconomic Policy Office, said that if the political situation continued and prevented a new government being formed by the third quarter, it was highly possible for gross domestic product to grow even less than last year's 2.9 per cent.
"Previously, we expected this year to see growth at close to 3 per cent if there were a new government in place by the third quarter. In the worst case, if the government is formed in the fourth quarter or later, the economy will certainly grow at a lower rate than last year," Don said.
He said the central bank was monitoring whether the prolonged protests would drive down employment. If they do not, the economy will stage a quick recovery when the political problem ends.
At present, the political situation is hurting the tourism sector, reflected by January's flat growth of tourist arrivals. That month, the number of foreign tourists rose 0.1 per cent year on year to 2.3 million. Hotel occupancy rates in Bangkok are down. The occupancy rate dropped to 60.8 per cent in January from 64.3 per cent in the previous month.
January's economic figures dropped from December, as the BOT expected. Exports were lower than estimated mainly because of low automobile shipments.
Imports continued to contract in January mainly because of a sharp year-on-year drop in gold imports.
"The import contraction followed the slowdown in domestic demand and exports. If imports continue to contract, it could be a negative economic indicator. We expect exports to improve," Don said.
Based on automobile operators questioned, January's car exports were unsatisfactory, but they still expected year-on-year growth.
January's business confidence dropped to 45.4, below 50 for the seventh consecutive month, because of the prolonged political protests. Three-month business confidence remained satisfactory.
Financial institutions' loan growth in January was 9.2 per cent, a single-digit figure for the first time in four years, with slowdowns in household lending to 9.9 per cent and business credit to 8.4 per cent.
Don said the March 12 meeting of the central bank's Monetary Policy Committee would review its estimated 2014 and 2015 economic figures. January's figures, excluding exports, came out as expected and if there remain no factors to affect the economy significantly, there will be no revision of the economic forecast at the MPC meeting.
In response to concerns that Thailand may enter an economic recession, Don said it was possible but there was little chance for this to happen.
"We have to see the economic figures for the first and second quarters of this year on whether they contract from the previous quarters. And we will see them at the middle of this year," he said.