Thailand recorded its slowest economic growth in three years in 2014 as political unrest curbed local consumption, while lower agricultural prices and cooling global demand hurt exports.
Gross domestic product rose 0.7% last year, the National Economic and Social Development Board (NESDB) said on Monday, matching the median estimate of 15 analysts in a Bloomberg survey. GDP grew 2.3% in the three months through December from a year earlier, compared with the median of 2% in a separate survey.
Gen Prayuth Chan-Ocha is struggling to accelerate budget spending after an $11-billion stimulus package failed to spur local demand. Exports fell for a second consecutive year for the first time in at least two decades, and the International Monetary Fund forecasts only a “modest” economic recovery this year as lower oil prices spur consumption.
“Fiscal policy clearly needs to lead to jumpstart the economy,” said Weiwen Ng, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd. “The marginal boost from trimming the interest rate from already low levels is minimal,” even as the sequential momentum of the economy is improving, he said.
The baht was little changed at 32.60 against the dollar as of 11.15am in Bangkok. The yield on government bonds due 2025 rose seven basis points to 2.855%, set for the biggest increase in almost a month, while the stock index gained 0.1%.
Risk factors
The economy grew at the slowest pace last year since 2011, when the worst floods in decades shuttered thousands of factories. Consumption expanded 2.4% last quarter from a year earlier, compared with 1.8% in the previous three- month period, while investment climbed 3.2% from 2.9%, data showed.
The NESDB maintained its 2015 forecast for expansion at 3.5% to 4.5% while cutting its export growth estimate to 3.5% from 4%.
“Risk factors that we are facing are lower agricultural prices, uncertainties in the global economy, weakening key currencies and rising real interest rates,” said NESDB secretary general Arkhom Termpittayapaisith. “But we believe supporting factors still outweigh the risk factors,” and first- quarter growth should be higher, he said.
The Bank of Thailand held its benchmark interest rate at 2% for a seventh straight meeting last month, and has said there is a growing probability that headline inflation may miss its target because of lower oil prices.
The low inflation rate has led to higher real interest rates, Mr Arkhom said. “Monetary policy should be supportive to economic recovery,” he said, adding that businesses still need help with funding costs.