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More foreign capital may leave Thailand, say economists
Publication Date : 26-08-2013
There is a high possibility of greater foreign capital outflow from Thailand, economists say.
Bunluasak Pussarangsri, exe-cutive vice president of CIMB Thai Bank, said that of Thailand, Indonesia, Singapore, the Philippines, and Malaysia, only Thailand and Indonesia posted current account deficits in the first six months. The country's 2.8-per-cent year-on-year growth rate in the second quarter is also worse than expected.
He expects the Thai economy to decline in the second half, especially in the third quarter as signs of economic improvement are yet to be seen. The export sector is also unlikely to pick up.
He added that his bank is in the process of revising downward the country's economic growth from the previous forecast of between 4 to 5 per cent following disappointing second-quarter economic growth.
According to Usara Wilaipich, a senior economist at Standard Chartered Bank (Thai), the foreign outstanding portfolio investment in Thailand - since the US Federal Reserve introduced the quantitative easing (QE) policy for the first time in 2009 - stood at 700 billion baht (US$22 billion).
She added that her bank is not revising downward Thailand's economic growth rate but is maintaining it at 4 per cent this year, as the growth decline in the second quarter had long been expected. She believes growth will pick up in the second half.
Piyasak Manason, an economist at Kiatnakin Bank, said that it is likely that in the long term, the baht value would move between 35 baht to 36 baht against the US dollar, the same rate before the Fed launched the QE measure. The baht appreciated after the QE measure was introduced and peaked at between 28 baht to 29 baht. In the short term, the baht movement would be volatile at between 32 baht to 33 baht.
He added that if the Fed really tapers the QE, this would spark a new wave of capital outflows. But investors still hold a positive view on the Thai economy and the region has a continued growth rate.
However, his bank has revised downward Thailand's economic growth to 3.8 per cent this year, down from the previous forecast of 4.5 per cent, due to the slowing economy in the first half, coupled with the slow recovery of the global economy. It also revised down the forecast of export growth to 2 per cent from 5 per cent forecast earlier.
Hopes on investment, tourism
Recently the National Economic and Social Development Board (NESDB) made a downward revision of the economic growth forecast for 2013 to 3.8-4.3 per cent, the second revision this year, following its May revision to 4.2-5.2 from the original forecast of 4.5-5.5 per cent.
Despite the poor outlook, the NESDB expected that investment and tourism should buoy the economy in the latter half, as well as the government's economic measures. Thailand's tourist arrivals should hit 26.2 million this year, against a previous target of 24.7 million.
Despite the growth slowing to 4.1 per cent in the first half, Prime Minister Yingluck Shinawatra recently said the outlook was good and the slowdown was in line with regional movement. She promised more action to boost domestic spending and investment.
The current-account deficit now is raising concerns among foreign investors, as they take the funds they had pumped into emerging markets following the QE back to the US.
So far this year, foreign investors' net selling of Thai bonds has been worth 170 billion baht as of August 22, against 110 billion baht in net selling of Thai equities, most transacted since May. The remaining foreign holdings in Thai bonds are estimated at 750 billion baht, from 800 billion baht in June, according to the Thai Bond Market Association. Since the launch of QE in 2010, about 140 billion baht flowed into the Thai equity market, Nomura Research said. Since May, about 77.4 billion baht has been sold, or 65 per cent of the total.
US$1 = 31.76 baht