If incumbent Prime Minister Prayut Chan-o-cha continues to lead the next government in his present capacity, the CCI is expected to rise.

Thanavath Phonvichai, director of UTCC’s Centre for Economic and Business Forecasting, said the CCI fell to 79.2 in April, the lowest since January 2018, from 80.6 in the previous month on concerns over the following issues: Slow Thai economic recovery, drops in Thai export, US-China trade war and the global economic slowdown, low growth in Thai tourism, as well as low farm income as a result of low crop prices.

“The key cause of the plunge in CCI lied in concerns over the local political situation after the election,

as reflected in the index on opinions involving the political situation which slid for a second straight month in April to its lowest level in 58 months since July 2014

Expectations sharply dropped after the election due to a lack of confidence with consumers taking a cautious approach on spending. The Thai economy is expected to post a low growth of 3.2-3.3 per cent in the first half of this year,” Thanavath said.

Meanwhile , the confidence index in April on the overall economy stood at 66.2, job opportunity at 74.6, and future income 96.7 – all down from their respective figures in March.

For the second half of this year, the centre will watch next month’s survey as the formation of the new government is crucial to a return of consumers’ confidence.

If protests occur after the new government, consumers’ confidence will slide further and the Thai economy growth could fall to 3.5 per cent this year, Thanavath said.

Ghanyapad Tantipipatpong, chairwoman of the Thai National Shippers’ Council, said the council has cut the growth forecast for this year’s export to 3 per cent, from the earlier estimate of 5 per cent.

Risks to Thai export growth extend from the global economic slowdown, higher Vietnamese export particularly to the European market, global warming which could affect agricultural produce, to the likely increase in Thailand’s daily minimum wages, on which a conclusion will be reached on May10.

The shipping council has urged the next government to promote Thailand as a centre for export and processing of agricultural products by amending trade regulations, reducing repetitive legal steps and easing approval procedures for imports of raw materials for exports, as a means to facilitate business operators. Proper zoning of farming areas should also be made, while roadshows should be accelerated to open new markets through trade negotiations.

In March this year, Thai export totalled US$21.44 billion, down 4.9 per cent year-on-year while Thai imports amounted to $19.44 billion, down 7.6 per cent. In the first three months of this year, Thai exports amounted to $61.99 billion, down 1.6 per cent year-on-year while Thai imports stood at $59.98 billion, down 1.2 per cent. As a result, Thailand enjoyed a trade surplus of $2.01 billion.

“The Commerce Ministry is maintaining its target inflation bracket for 2019 at between 0.7 and 1.7 per cent, with a mean of a 1.2 per cent rise in prices,” the director-general of the Commerce Ministry’s Trade Policy and Strategy Office, Pimchanok Vonkorpon, said after the April CPI increased 1.23 per cent year on year, down from the 1.24 per cent year-on-year expansion for March.

The CPI rose 0.44 per cent from the reading in March and by 0.86 per cent over the first four months of 2019, Pimchanok said at a press conference yesterday.

The expansion in the index is primarily due to rises in the indices for fresh food and energy.

The index for raw food increased 3.3 per cent as a result of low crop yields. This was caused by the worsening weather in the summer, with many agricultural areas in the country facing drought, Pimchanok said.

As the temperature rises, the yields of food crops such as vegetables decrease. In turn, the rate of spoilage in these fresh products increases. This lowers the supply of the products and causes price rises in the market, Pimchanok said.

However, she noted that the reduced supply of fresh food had not reached point where shortages were occurring in the market.

The index for energy rose for a second consecutive month, reaching 2.33 per cent, in line with an upward trend in world energy prices due to cuts in oil production abroad.

In a separate interview, Standard Chartered Bank economist Tim Leelahaphan cautioned that the rise in oil prices may lead to higher than expected inflation in Thailand.

“We predict that the annual average inflation level for 2019 will be 1.5 per cent, and we will have to keep a close eye on the oil price situation,” he said.

The economist concurred with Pimchanok, saying that the rising temperatures and drought in some areas would cause some perishable goods to become costlier in the next few months.

On the flipside, the prices for some types of fruit have fallen as a result of the hot weather. Plantations of some varieties have borne fruit at a faster rate, leading to increased supply and a corresponding drop in prices. The index for fruit fell by 0.5 per cent.

In prioritising Southeast Asia in its assistance, the multilateral lender would get involved in many operations in the region, said Ramesh Subramaniam, the director general of the bank’s Southeast Asia department.

Subramaniam told the ADB annual meeting yesterday that the development lender would invest around US$5 billion in its sovereign operations in the region every year, leveraging an additional $1 billion from development partners including the World Bank, Germany’s KfW and AFD, Britain’s Department for International Development, the Japan International Cooperation Agency and the Asean Infrastructure Fund.

“Our operations in Southeast Asia are quite successful. Last year, the total disbursement amounted to US$3.6 billion and nearly two-thirds of that came from policy-based loans,” he said at the event in Nadi, Fiji.

By the end of 2018, the ADB alone had invested $17.6 billion in the region. Vietnam accounts for nearly 40 per cent of the bank’s regional operations, followed by Indonesia (22 per cent) and the Philippines (19 per cent). Myanmar receives 7 per cent of the ADB’s investment in the region, while Thailand secures the smallest share at just 1 per cent.

According to Subramaniam, transport constitutes a third of the ADB’s operations in Southeast Asia, followed by energy, infrastructure services, agriculture and public sector management in rounding out the Top 5 sectors for ADB investment.

“We aim to reduce poverty in Southeast Asia through inclusive economic growth and regional integration. Our operational priorities include infrastructure projects, public sector management, finance, health, education, water management, agriculture, climate change and disaster risk management,” he said.

“We have significant engagement in many Asean countries. We have witnessed significant growth in Cambodia, Laos, Myanmar, the Philippines, and Vietnam as expected. Some of the larger economies including Singapore, Malaysia and Indonesia, to some extent, have been a bit slower.”

Driven by significant needs for development, Subramaniam foresees sustainable growth in Cambodia, Laos and Myanmar, and that growth could largely contribute to those nations’ gross domestic product. He takes pride in saying that the ADB has adopted a “nice model in a climate-friendly manner”.

Last month the lender launched the Asean Catalytic Green Finance Facility to spur more than $1 billion in green infrastructure investments across Southeast Asia. The facility provides loans and technical assistance for green infrastructure projects such as sustainable transport, clean energy, and resilient water systems.

“The ADB has committed US$1 billion in terms of financing for climate change in this region, and we will also be engaging with some other countries to reduce the use of plastics and pollution,” he said, adding that bank takes climate change into consideration in all of its projects.

In Thailand, ADB has invested only US$93 million in two projects, the lowest amount in Southeast Asia. Despite the minimal investment, Subramaniam insisted that the lender has re-engaged with projects in the transport sector, particularly in connectivity for the Greater Mekong Sub-region.

“In Thailand, we are engaging in the transport sector including railways. We are looking at a number of regional airports to improve secondary cities. It is a study under way. We are also looking at private sector projects, and [that is] still under discussion,” he said.

Subramaniam said the ADB’s budget allocation for Myanmar is “special”, as the lender aims to invest more than $420 million in its development projects there a year. The bank mainly focuses on connectivity, transport, electricity and private sector development in Myanmar.

“The two-year allocation for Myanmar is about $900 million, excluding the co-financing projects with our development partners,” he said, referring to 2019 and 2020.

“It will be continuing. In February, the ADB donors agreed to continue that special allocation, so it will go ahead until the next year.”

Subramaniam said the ADB is looking at three projects in Myanmar, and these could be approved later this year.

One of them is a $200 million project that aims to promote community-level resilience. The project will encourage the community to work together and decide what kind of infrastructure they need, and then the ADB will support them to meet their needs.

“That project has gone through internal clearances and we hope to approve it on September or October,” he said.

A further two projects include the credit guarantee facility for micro and small enterprises to improve access to finance for businesses and rural roads improvement. Subramaniam expects to approve both projects by the end of this year.

“We anticipate that we will be providing a boost to micro and small enterprises. We also use the regional facility called the Mekong Business Initiative, which aims to support a series of startups,” he said.

“Myanmar is super important for us in terms of promoting regional connectivity. We have supported two large transport connectivity projects in the East-West Economic Corridor, including in the areas bordering with Thailand. Those investments should be continuing.”

 She said these challenges could impinge on the potential growth and prosperity of countries in the so-called Asean+3 grouping, if the issues are not addressed decisively.

The grouping brings together the 10 Asean states plus China, Japan and South Korea. Many of these countries are seeking to achieve high-income or upper-middle income status in the near future.

At a seminar during the Asian Development Bank’s (ADB) annual meeting, underway in Fiji till Sunday, Chang said the region is still confronted with daunting medium- and long-term structural challenges. She stressed the importance of three key challenges – productivity, investment and regional financial architecture.

 “The key challenge at this juncture is that Asean+3 economies need to transition to the new economy,” she said. “This adds urgency to the task of addressing the structural constraints the region is facing.”

The AMRO chief urged policymakers and experts to find ways to move progressively beyond the “manufacturing for exports” strategy, embracing the new technological revolution.

While total-factor productivity accounted for about 1.5 percentage points of the approximately 7 per cent annual growth of the region between 2002 and 2007, its contribution dropped sharply in the 2011 to 2017 period.

“This trend has to be addressed urgently – at a time when the fourth industrial revolution and the new economy are transforming the workplace and changing the technological and skill intensity of products,” she said.

Despite some signs of a pick-up in recent years, investments remain well below what is needed to fulfil growth potential in the region.

Chang set a good example in infrastructure, saying: “It is clear that investment shortfalls have led to an infrastructure gap and undermined the capacity for growth.”

A few Asean+3 economies could face stresses from financial market turbulence as financial markets are characterised by volatile capital flows, she warned.

“The question is what we can do as a region to improve the resilience of developing economies to volatility shocks. A big part of this surely must be about developing and strengthening the regional financial architecture,” she said.

Chang suggested developing and deepening capital markets to recycle ample savings within the region, and strengthening the regional financial safety net.

For the next phase of economic development, the region needs to redouble its efforts to enhance capacity and cross-border connectivity in order to ensure a successful transition to the new economy, she said.

Hoe Ee Khor, chief economist at AMRO, said manufacturing and services would be transformed by the fourth industrial revolution. He urged finding out what types of capacity and connectivity are needed in the new economy.

“Going forward, they will require higher levels of technology, expertise and connectivity to deliver customised goods and services,” he said.

The organisation yesterday released its new annual flagship report on Asean+3 economies. Despite heightened global risks and stronger external headwinds, the region is expected to remain resilient, growing at only a slightly slower pace until 2020, the report says.

“While regional growth is softening from 5.3 per cent last year to 5.1 this year and 5.0 next year, the longer-term economic fundamentals remain intact,” said Khor.

“Regional policymakers should stand ready to use available policy space to ease monetary and fiscal policies to mitigate downside risks and support the economy, if external conditions were to worsen.”

He urged the region to prioritise longer-term policies, with a focus on building capacity and connectivity to leverage on the fourth industrial revolution and sustain growth in the new economy.

According to the economist, rapid economic growth in the region will generate new infrastructure demand.

“Transition to the technology-heavy and services-driven new economy could accentuate strains arising from conventional gaps the region is facing,” he said.

He urged that developing economies invest in human capital and leverage on the complementarities in the region.

The bank also predicted that due to the political uncertainty, the Bank of Thailand (BOT) would hold its policy interest rate until the third quarter of this year.

“Our GDP growth forecast for 2019 remains 4 per cent as of now, as there are various uncertain factors such as the election results, progress in the trade war negotiations and economic stimulus packages from the government,” Tim Leelahaphan, Standard Chartered Bank’s economist, said yesterday at a press conference.

Standard Chartered had in January forecast 4.5 per cent GDP growth this year. However, after the sluggish growth in the first quarter and slow progress in the implementation of Eastern Economic Corridor projects, coupled with sliding exports and political uncertainty, the bank has adjusted down the GDP forecast to 4 per cent. It, however, remains a more optimistic prediction compared to other financial institutions in the country.

Leelahaphan acknowledged that the forecast was comparably optimistic. The BOT adjusted down its GDP forecast from 4 per cent to 3.8 per cent and Siam Commercial Bank’s Economic Intelligence Centre took theirs down to 3.6 per cent.

However, Leelahaphan insists that the 4 per cent growth rate is achievable based on three factors.

First, despite exports continuing to weaken in the first quarter, he foresees progress in the US-China trade negotiations, which may lead to Thai exports recovering in the second half of the year.

Second, the government is currently in the process of implementing an economic stimulus package to boost domestic spending. This may also contribute to overall economic growth during the year.

Political uncertainty is also expected to reduce after the new government takes office. This is a key factor damaging the sentiment of foreign investors, he said. Leelahaphan predicts the new government to be in place in May.

Nevertheless, he added, if progress were slow on these issues, Standard Chartered may lower the GDP forecast in the second half of the year to between 3.5 and 3.9 per cent.

“With the election results still unclear, the eventual formation of a new government is difficult to predict. Against this backdrop, we expect the BOT to keep rates steady for now. We expect a unanimous decision to keep rates on hold at 1.75 per cent in the May and June meetings of the Monetary Policy Committee,” he said.

“As economic growth recovers in the second half of 2019, we expect the central bank to raise its policy rate by 0.25 per cent, from 1.75 per cent to 2 per cent by the end of this year,” he predicted.

This is because the central bank has stressed the importance of financial stability within the country. The central bank values the creation of policy space to cope with long-term risks, he explained.

Another political risk that could damage the economy is the policies implemented after the new government is formed.

“All major political parties have promised to increase the minimum wage. However, we believe that the implementation of this policy will not occur in 2019,” he said.

If the minimum wage is hiked, the costs for businesses, particularly small and medium sized enterprises, would rise significantly, and these smaller businesses would struggle to survive and grow, the economist said.

Moreover, as businesses try to cut costs, workers may be made redundant as companies look to replace workers with automation amid rising minimum wages. The real winners in this scenario may be immigrant workers who are willing to undercut the rising minimum wage of Thai workers, he cautioned.

Nattaporn Jatusripitak, spokesman for the deputy prime minister in charge of economic affairs, said the fiscal stimulus package includes four measures:

N State welfare cards will see an increase of Bt200 per person per month in allowance for five months (May-September 2019) to those registered as disabled, for the purchase of products and services through electronic data capture (EDC), Thung Ngern Pracha Rat (Pracha Rat Money Bag) mobile app or cash withdrawal.

N A one-time subsidy of Bt1,000 per person to low-income farmers to purchase fertiliser, insecticide, and other factors of production through EDC, Thung Ngern Pracha Rat (Pracha Rat Money Bag) mobile app or cash withdrawal.

N A one-time subsidy of Bt500 per child for parents who hold state welfare cards, for the purchase of student uniforms and learning tools via the same methods.

N Increase in registered low-income earners’ purchase limit for necessary consumer products in Pracha Rat blue flag shops to Bt500 per person per month for two months (May-June).

Lawan Sangsanit, director-general of the Fiscal Policy Office and finance spokesman, said that the Finance Ministry saw an urgent need to proceed with the fiscal stimulus package for the middle of the year after first-quarter exports declined due to the global economic slowdown, which adversely affected the purchasing power of consumers, especially low-income earners facing still-high expenses.

The fiscal package includes tax incentives that allow individual taxpayers to deduct the value of travel expenses in major cities and secondary provinces for accommodation, food and drinks of up to Bt15,000 and Bt20,000, respectively, from personal income tax from yesterday until June 30 this year, and deduct the value of sports and education spending, purchase of Otop products and e-book expenses of up to Bt15,000 each from personal income tax.

Other tax breaks aim to encourage people to own residences and allow individual taxpayers to deduct the value of purchase of a building with land or a condominium unit of up to Bt5 million. Companies or juristic partnerships can deduct two times the value of investment expenses for an electronic tax system, including points of sale (POS), e-tax invoice and receipt and e-withholding tax.

The Cabinet also acknowledged an expenditure budget of Bt3.2 trillion for fiscal year 2020, which will start from October 2019. The budget is set for a deficit of Bt450 billion.

During the political transition to the new government, the Budget Bureau has asked the current Cabinet not to propose approval of the 2020 budget.

Once the new government takes office and presents its policy to Parliament, the Budget Bureau will propose the budget and other details for fiscal year 2020 for their public administration.

“We cannot say now whether the expenditure budget for 2019 will be used before the next fiscal year starts on October 2019. It depends on the next government,” said Nattaporn.

“If the [next] government is not much different from this government, it [budget] could be used in time at the beginning date of fiscal year (2020) and no budget review was expected. But a different government could delay use of the budget as there could be a review, new budgeting in details. In the past, in some fiscal years, the annual expenditure budget bill came into force late in that fiscal year,” Nattaporn said.