May 20, 2014 6:23 am JST

Thailand slashes 2014 growth forecast amid political unrest

TAMAKI KYOZUKA, Nikkei staff writer

BANGKOK -- Thailand's economic slowdown worsened during the first three months of the year, as political turmoil continued to weigh on internal demand and reduce exports.

     The National Economic and Social Development Board said Monday that seasonally adjusted real gross domestic product shrank 2.1% on the quarter in the January and March period, the first such decline in four quarters.

     The NESDB also lowered its growth forecast for 2014 from 3-4%, the result of a previous downgrade in February, to 1.5-2.5% -- below the 2.9% pace logged for 2013.

     Real GDP for the January-March term fell 0.6% on the year, marking the first year-on-year decline since October-December 2011, when many carmakers and other companies were devastated by major floods.

     Exports, the main driver of the Thai economy, swung into negative territory between January and March, dipping 0.4% on the year.

     Private consumption sank 3%. Consumer sentiment flagged as economic stimulus measures under ex-Prime Minister Yingluck Shinawatra, oft criticized as handouts, come to an end. Consumers also felt a chill from the country's chaotic political situation.

     New-car sales have been down by nearly 50% on the year since January. Figures had been robust until the first half of 2013, propped up by subsidies for buyers, but began to show year-on-year declines from last May.

     Investment in Thailand is also weak. There is a backlog of new investment projects of 200 million baht ($6.24 million) or more waiting for government approval. The Thailand Board of Investment was to have begun working on approvals this month, but the most recent meeting was canceled with no word yet on when work will resume.

     Large-scale rail and other infrastructure projects together worth 2 trillion baht face certain delay after a bill to finance them was ruled unconstitutional. Meanwhile, tourism-related consumption continues to fall.

     The NESDB lowered its export growth forecast for the year to 3.7% from 5-7%, and evinced concerned about a slump in investment. The board warned that lingering political unrest and a delay in the formation of a new government will obstruct budget compilation and stymie economic activity.