HSBC issues downbeat GDP outlook


DESPITE benefits from regional market integration, Thai GDP growth will continue to be subdued next year due to weak global trade, low commodity prices and China’s economic slowdown.

“It is a difficult situation for 2015 and 2016 [for Thailand’s economic growth]as long as global growth remains a bit subdued, as Thailand is very dependent on external conditions picking up,” said Joseph Incalcaterra, HSBC’s Hong Kong-based Asean economist.

HSBC forecasts Thailand’s GDP growth will come in at 2.6 percent this year and 3.3 percent next year.

Thailand’s economic growth projections are ranked the second lowest in Asean after Singapore, which HSBC predicts will expand by 1.7 percent in 2015 and 2.1 percent in 2016.

The Bank of Thailand projects the economy will expand by 3.7 percent next year but remains cautious due to downside risks related to the Chinese economy, the local drought and depressed farm prices.

The Commerce Ministry said exports, which make up 70 percent of Thai GDP, fell by 8.11 percent year-on-year in October to a value of US$8.6 billion due to softened global demand, plunging oil prices and volatile foreign exchange rates.

In the first 10 months of this year, shipments were down by 5.32 percent year-on-year to $80 billion.

Although a sharp downturn is not expected, China’s economic slowdown next year will be a headwind affecting Asean economies that rely on exports, Mr. Incalcaterra said, noting that Thailand, Malaysia and Singapore had the most exposure to the Chinese economic slowdown among their Asean peers.

China’s economy is expected to grow by 7 percent in 2015, declining to 6.7 percent in 2016, according to HSBC.

Despite a robust tourism industry, the Thai government may want to consider liberalising its services sector such as by allowing foreigners greater access to the domestic market in order to reap the enhanced economic gains stemming from the Asean Economic Community (AEC), he said.

The AEC, which is slated to take effect at the end of this month, could create a major trade and investment bloc that accelerates services liberalisation and boosts pan-Asian investment flows.

The economies of scale made possible by the removal of barriers to trade in services and investment have the potential to turn Asean into a $2.6-trillion integrated economic powerhouse whose rapidly expanding middle class will fuel the next phase of global growth, HSBC said.

Mr. Incalcaterra said Thailand’s political willpower would determine whether to join the Trans-Pacific Partnership (TPP), but the country has been wary compared with Indonesia and the Philippines.

“The benefits to Thailand from the TPP are very clear, particularly in the automotive sector,” he said.

Deputy Prime Minister Somkid Jatusripitak has said Thailand is “highly likely” to seek membership in the TPP but first needs to weigh the impact of the free-trade accord on its export-led economy.

Membership could be a boon for Thai exports of electronics, seafood, agriculture and particularly automobiles.

The automobile sector accounts for 10 percent of Thai GDP, and large-scale investment in assembly plants here have been made by Japanese car makers including Toyota and Honda.

The US-led pact has 12 members including Canada, Australia, Japan, Mexico and Chile as well as four Asean members — Vietnam, Malaysia, Singapore and Brunei.

The TPP slashes tariffs in a market of 800 million people representing 40 percent of the global economy.



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