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The economy slowed sharply in 2013 as domestic demand weakened and exports were sluggish. Political disruptions hurt the economy in the second half of last year and cloud the outlook for 2014. Growth is forecast to remain subdued before rebounding in 2015. Policy deficiencies have prompted calls to improve the design and implementation of public programs.
Political tensions weighed on the economy in the second half of 2013, dampening consumption, investment, and government spending. Slack domestic demand and sluggish exports confined growth in gross domestic product (GDP) for the year to 2.9%. Growth in the fourth quarter, when political unrest intensified, decelerated to 0.6% year on year.
Private consumption edged up in the first half of 2013 but then fell, finally contributing just 0.1 percentage points of GDP growth for the year. Consumer confidence weakened during the second half as political tensions worsened.
These tensions, together with a lackluster outlook for merchandise exports, weighed on fixed capital investment, which fell steeply in the second half and declined by 1.9% over the year. This result reflected mainly weakness in private investment, but public investment slowed when the government became distracted by political issues and hobbled by legal challenges. Fixed investment also came off a high base in 2012, when it was propelled by reconstruction and replacement after the floods. Total investment made a small contribution to GDP growth in 2013 because of an increase in inventories.
A sharp slowdown in import volumes contributed to higher net exports of goods and services, which added to GDP on the demand side for the first time in 4 years.
On the supply side, nearly all the growth in GDP was generated by services, while agriculture and industry barely contributed.
|Selected Economic Indicators (%) - Thailand||2014||2015|
|Current Account Balance (share of GDP)||-0.1||0.5|
Source: ADB estimates.
The outlook is subject to unusually high uncertainty. After antigovernment protests intensified in November 2013, the government dissolved the parliament in December and scheduled national elections for 2 February. However, disruptions to registration and voting in some areas meant the elections were not completed, leaving the administration in a caretaker role. Such status imposes restrictions on its ability to borrow, spend, or make policy decisions. The Constitutional Court later nullified the 2 February election.
Forecasts assume that government policy making will remain constrained through the first half of 2014. On this basis, economic growth is projected at a modest 2.9%, accelerating to 4.5% in 2015 provided that a stable government is formed this year.
Source: ADB. 2014. Asian Development Outlook 2014. Manila.