Thailand's GDP forecast slipped to 4.6%

On the back of reduced government investment spending.

According to DBS, GDP forecast for Thailand has been lowered to 4.6% as its projections for government investment spending gets reduced sharply in 2H13.

Here's more:

The THB 350bn water management program hit a snag after the Central Administrative Court ordered environmental impact assessment (EIA) and health impact assessments (HEIA) on the projects last week.

Under an optimistic scenario, these assessments would likely take at least several months (up to a year) and this implies a delay in infrastructure spending over the coming two quarters even though winning bids were ready to be awarded.

Accordingly, we have revised down our GDP growth forecast to 4.6%, from 5.0% previously as our projections for government investment spending gets reduced sharply in 2H13.

We now expect a pickup in public infrastructure spending only in 2Q14 and have bumped up our 2014 GDP growth forecastto 5.2% from 5.0% previously.

The medium term outlook forthe Thai economy depends critically on three factors – the execution of the infrastructure projects (THB 350bn water management plan and THB 2.2trn infrastructure program), the momentum of domestic demand growth and a recovery in external demand.

As mentioned earlier, public infrastructure spending islikely to be delayed with the bulk of the impact on growth manifesting only in 2Q/3Q 2014. Regarding domestic demand,some momentum appearsto have been lostin 1Q.

The government appears keen on supporting consumption and hassince gone back on its plan to reduce pricesforthe rice pledging scheme by 20% to ease strains on the budget.

With minimal price pressures and fiscalstimuluslikely to stay for a while more and policy rates can stay low, consumption islikely to stay supported. On the externalfront, global demand is unlikely stage a strong recovery.

With moderate growth in China and the US,the externalsectoris unlikely to pose headwinds nor provide any tailwindsin the coming months.

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