2013 Apr 10
April 10, 2013

ADB expects robust Asean growth

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Southeast Asian economies will maintain resilient growth this year and the next thanks to robust domestic demand and deeper regional integration, but capital inflows will continue to pressure currencies, says the Asian Development Bank (ADB).

In the Asian Development Outlook 2013 report released yesterday, the ADB forecasts Asean’s economy will grow 5.4% this year, on par with last year’s growth of 5.5%, with estimates of 5.7% for 2014, with an expected increase of intra-Asean trade.

The economies of India and China _ the two giants of Asia _ are showing signs of recovery. India’s growth is forecast at 6% and 6.5% for 2013 and 2014, respectively, compared to 5% last year. China’s economy is projected to expand by 8.2% this year, up from 7.8% in 2012. The projection for 2014 growth increases to 8%.

Luxmon Attapich, ADB’s senior country economist, said gross domestic product growth for Thailand is forecast at 4.9% and 5% for 2013 and 2014, respectively. This is reasonably high considering the steep growth of 6% last year.

Strong fundamentals and Quantitative Easing (QE) issued by the US and Europe and now Japan will result in more capital inflows into Asean. This could lead to a possible trade-off between currency values and asset prices. At the moment, inflation has remained in check but pressure is building and will heat up, said Ms Luxmon.

“Threats of bubble property prices are slowing down and not volatile at the moment. Still, it requires monitoring,” she said.

Concerning Thailand’s prospects, government investment in water management and transport infrastructure will play a big role. A gradual improvement in export performance is expected in 2014 while modest inflation is expected given the stable outlook of global oil prices while the government is likely to continue diesel and other subsidy policies, she added.

“Risks to Thailand’s outlooks for this year and the next are capital inflows that put upward pressure on the baht, damaging the competitiveness of export. Meanwhile, delays in implementing government investment projects will affect the overall economic picture,” Ms Luxmon said.

The ADB expects the first budget disbursement of around 40 billion baht under the government’s 2-trillion baht infrastructure investments next year. Designs of the capital-intensive high-speed trains have yet to kick off while the government has not finalised which organisation will be in charge of the train projects will result in slow start of the implementation.

Ms Luxmon said the government plans to set up a special monitoring system set up to ensure the transparency of the budget disbursement and project implementation, just as the Democrat-led administration did for public investments under the Thai Khem Kheng infrastructure scheme.

“Now the only problem is how strong the special system is. This is something we have to keep an eye on,” she said. –Bangkok Post