Thailand Water Report Q1 2015
BMI View: This quarter we have revised and expanded our forecasts for the water sector. We now covernon mains consumption and treated wastewater. With the continued stalling of the project pipeline and thepersistent risk of both drought and flood damage, in conjunction with high losses and limited sanitationfacilities, we view the Thai water sector as offering minimal opportunities and high risks to both servicesand infrastructure companies. The recent announcement that some urgently needed works are to berestarted is a positive step; however, we still anticipate delays and cancellations.
On March 12 2014, the central bank cut the benchmark policy rate by 25 basis points to 2.00%, the lowestsince January 2011. Given that the Thai economy remains relatively fragile, we expect the benchmarkinterest rate to remain at 2.00% for the remainder of 2014 and into H115 to facilitate an economic rebound,with monetary tightening to only take place in H215. Domestic borrowing costs could therefore remainattractive for construction companies to take up new projects or carry out capital-intensive constructionworks. The re-establishment of the country's legislative body - the National Legislative Assembly (NLA) -and the formation of an interim government in August 2014 have increased political stability in Thailandover the near-term. This in turn has also provided greater clarity over Thailand's public sector disbursementsfor fixed-asset investment in FY2014/15.
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