THE ECONOMY will expand by more than 3 per cent this year but the capital market will be full of fluctuations caused by global uncertainties, the Institute of Directors (IOD) was told yesterday.
Thailand’s economy should be able to expand at a rate that is better than last year, despite confusion within the global economy and capital markets brought about by a possible deflation situation in Europe, which will affect debtors, lower oil prices that did not really help global capital markets and the expectation of a US hike in interest rates, Supavud Saicheua, managing director of Research Group at Phatra Securities Plc, said at the IOD’s Director Briefing yesterday.
“Phatra expects government investment to increase by 7 per cent in 2015 while the Bank of Thailand expects it to increase by 11 per cent. We believe exports will expand by 3 per cent mainly from border trade while the central bank expects the sector to grow by only 1 per cent in the same period due to an increase of global uncertainty,” he said.
“In another view, Thailand’s net cost from the import of oil, which is worth around 8.1 per cent of the GDP per year, is expected to decrease from lower oil prices. This means that import bills should decrease by 20-30 per cent, which is good news, and Thailand’s trade and current accounts would be better, which will contribute to the strengthening of the Thai baht but that will not help the export sector,” he added.
Phatra expects Thailand’s GDP to expand by 3.7 per cent in 2015 but Supavud said there is a downside risk since he is unsure whether the falling oil prices was caused by demand or supply since the Organization of the Petroleum Exporting Countries’ decision to lower only 2 per cent of its oil supply should not have affected the oil price that much.
He also revealed that total trade weight to exchange rate (Nominal Effective Exchange Rate) has shown that the Thai Baht has strengthened by 4.9 per cent in 2014 and 3 per cent in terms of the Real Effective Exchange Rate (REER), which shows that the country’s currency is stable and the baht might not be as weak as expected. Boontuck Wungcharoen, chief executive officer at TMB Bank Plc, said the 50 per cent dip in oil prices would help Thailand’s economy in the long run as the cost of logistics has already declined by 15-16 per cent but there are winners and losers from this development and the cost of logistics could have been lowered even further.
“The industrial sector, which has high energy consumption, would stand to benefit from the lower oil prices but the agriculture sector would stand to lose out from lower crop prices. Nevertheless, the overall net effect from the lower oil prices should be positive and it should help the country’s gross domestic product to expand by 0.2-0.5 per cent, which means that the country’s GDP expansion for the whole year could be around 3.5-4 per cent in 2015,” he said.
He explained that the world’s economy has been doing badly since 2008 but the US’s quantitative easing program has distorted the real view of the global economy where agriculture and energy products’ prices along with stocks have shot higher than where really are.
Now the real prices reflect the real market prices and it has “shocked people” since the global economies have shown themselves to be worse than the public thought.
“People were quite shocked when they found out how bad the global economy really is but the fallen oil prices, which actually reflect the market prices, should help with the global economic expansion in the next period,” he added.
Source: The Nation | January 20, 2015