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Thai auto sales may bounce back in H2 if government spends

[BANGKOK] Thai car sales may rebound in the second half of this year after a long slump if the military government accelerates spending to help boost the sputtering economy, the Federation of Thai Industries (FTI) said on Tuesday.

Domestic auto sales fell 10.8 per cent in February from a year earlier, hurt by the slow economy, which is being weighed down by lower commodity and sluggish investment, the FTI said.

"But we think sales should improve in the last six months if the government can disburse more. We will see if we need to adjust our targets," Surapong Paisitpattanapong, spokesman of the FTI's Auto Industry Club.

The FTI expects domestic car sales to rise 25.35 per cent to 950,000 vehicles after a 33.7 per cent drop in 2014. Production is expected to increase 14.36 per cent to 2.15 million cars, with 1.2 million for exports.

Thailand is a regional vehicle production and export base for the world's top carmakers.

Auto sales have declined since May 2013 on a yearly basis, following the fading effect of a government first-car subsidy scheme, which ended in 2012, when sales surged 81 per cent.

The army seized power in May last year to end months of street, but has struggled to revive economic growth as exports remain weak and domestic demand subdued, crimped by high household debt and shaky consumer confidence. That is putting pressure on the junta to speed up spending.

The FTI said its industrial confidence index fell for a second straight month in February as manufacturers were worried about the economy and sluggish consumer spending.

Southeast Asia's second-largest economy grew 0.7 per cent last year, the weakest pace since devastating flooding in 2011.

For 2015, the government expects 4 per cent growth, while the central bank last week cut its economic growth projection to 3.8 per cent from 4.0 per cent.

On Tuesday, the Asian Development Bank (ADB) cut its 2015 economic growth forecast for Thailand to 3.6 per cent from 4.0 per cent earlier, citing weak exports and private consumption.

But the economy this year and next should benefit from a relatively calm political environment, said Luxmon Attapich, senior country economist with the ADB. "Government spending will have to be a hero, and will have to help push the economy. With government spending, private investment should follow," she said.


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