Exports, private stakes to drive Thai GDP growth: WB

Economy February 12, 2014 00:00

By Erich Parpart

The Nation

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The World Bank has an optimistic outlook for Thailand's economy as the global recovery gains strength, with the institution predicting that the country's real gross domestic product will expand by 4 per cent this year.

The World Bank expects Thai GDP growth to be driven by goods exports and a recovery in private investment, since both have remained relatively untouched by the current political turmoil.

“The world’s GDP growth is on the rise and Thailand’s economy and the export sector will certainly benefit from the potential increase of global demand, especially from the recovery in the United States and Europe,” said Kirida Bhaopichitr, senior country economist, World Bank Thailand.

According to the bank’s “Global Economic Prospects” report, the world’s real GDP growth for 2014 is expected to come in at 3.2 per cent, which is one of the main reasons it has predicted Thailand’s export sector to grow by around 6 per cent after contracting last year.

The World Bank expects private investment to expand by around 5 per cent this year, after contracting last year.

She explained that after the major flooding of late 2011, companies had spent heavily to cope with the losses they faced, which led to high investment in 2012, but there was then a lower level of spending last year.

The World Bank expects the private sector to recover from last year’s investment slump, basing its prediction on the record investment-project approval value of Bt1.46 billion by the Board of Investment in 2013 and the continued high level of foreign direct investment.

Other supporting factors for the forecast GDP growth rate of 4 per cent include stable oil prices and the low level of interest rates and inflation.

Kirida said the risks and challenges for Thailand’s GDP expansion this year were mostly internal pressures, including household de-leveraging after a rapid expansion of household debt and a slowdown in government spending due to the delay in the implementation of public projects and programmes.

The institution said the continuation of the country’s political uncertainty had created a downsize risk, with the impact being felt in both public investment and tourism, but this would only last for the duration of the protests and things should return to normal once the instability is resolved, she said.

“The main impact of the protests has been on tourism, which slowed down since the last quarter of 2013 but should bounce back within a month after the situation is resolved,” said the economist.

However, she warned that prolonged political uncertainty would continue to lower tourism receipts, disrupt government policies and investments and distract the administration from longer-term development issues – and investor confidence would fall.

Based on its evaluation, the World Bank has predicted public investment will grow by just 1 per cent this year, while the tourism sector will expand by 10 per cent – half of last year’s estimated growth rate.

The bank expects Thailand’s consumption to remain subdued due to high household debt, political uncertainty and unpaid money from the rice-pledging scheme, while the current-account deficit is expected to be lower than last year’s level because of the larger trade account.

Ulrich Zachau, country director, World Bank Southeast Asia, said that inequality between the rural poor – especially in the North and Northeast – and those living in urban areas was one of the main problems facing the country.

“Inequality in education, health and opportunity is mainly caused by the imbalance in public spending, which varies across Thailand,” he said.

The World Bank’s “Public Financial Management Report” in 2013 showed that 72.2 per cent of public spending was for Bangkok alone, with the Northeast having the lowest share, at 5.8 per cent.

Per-capita public spending in health and education was also highest in Bangkok at Bt15,000 and Bt21,000, respectively, when compared to Bt1,000 and Bt4,000 in the Northeast.