Thailand's GDP growth forecast slashed to 3.7%

Sluggish exports loom in the horizon.

According to DBS, the government of Thailand has revised its GDP growth forecast for 2013 down to 3.7% YoY from 4.5% previously (DBS: 4.0%). Part of this owes to a lower forecast for export growth – 1.8% vs the previous estimate of 4%. 

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Exports remain sluggish despite posting better than expected growth of 3.9% YoY in August. With Europe exiting recession, Asia’s hitherto falling exports there should at least begin to turn sideways. That will help the outlook modestly.

The key reason forthe downward revision to growth, however, isthe delay in the government’s THB 2.2tn infrastructure projects. The parliament has recently approved this plan, and thus, a ramp-up in public investment is likely to bolster growth into 2014.

That investment growth remainssupportive is also evidentfrom recent imports data. Total imports of capital goods grew about 2% YoY in the year-to-date, a decent number considering the high base effects from last year’s post-floodsrecovery efforts. Our current forecast for 2014 GDP growth remains at 5.2%.

Meanwhile,the latest BOP data shows a decent current accountsurplus of USD 1.3bn in August. This is supportive of our view that the current account deficit seen in 2Q wastemporary rather than structural. As mentioned, export growth should improve slowly going forward.

Moreover, productivity in the manufacturing sectorremains comparatively high in the region. Even if the current account posts a small deficitthis year, we expect a smallsurplus of 1%-1.5% of GDP in 2014.