THE ECONOMY has the potential to grow by 4.5-5.5 per cent a year if the country addresses hindering structural issues, said Bank of Thailand Governor Veerathai Santiprabhob.
While Veerathai is confident growth in gross domestic product will surpass 3.5 per cent per annum, he said the economic growth rate must exceed the population growth rate to ensure that everyone benefits from the expansion.
“In the present context, a growth rate of 4.5-5.5 per cent is suitable for Thailand. The rate is achievable if we seriously deal with structural issues,” he said. “We need to speed up the economic restructuring to ensure a sustainable growth path.”
First of all, Thailand’s manufacturers and their supply chains need to embrace more technology, he said.
Thailand recently introduced new measures in a bid to ensure greater volume of value-added products. It is doing that through initiatives to promote research and development.
The Board of Investment has also changed its focus, basing its incentive scheme on innovative investment rather than factory locations. A new growth path has been drawn up, the so-called S-curve, to promote investment in 10 targeted industries. More sophisticated products are also the target of the Eastern Economic Corridor.
Veerathai also believes it is highly possible to boost the agricultural sector’s productivity. This requires more skilled labour, which is a pressing issue given that the country’s working-age population will be the first in the region to post a decrease. To address this, education should be the key agenda.
Meanwhile, a regulatory framework must be adjusted in response to the new growth agenda. For example, rules must be relaxed to draw more foreign experts.
Veerathai said that while the fragile global-demand recovery posed a big challenge, internally unemployment could spike because of the adoption of technology in the production process. For now, some companies have cut overtime for workers, though mass layoffs are not an issue.
The economy could benefit from an increase in the contribution from the service sector, particularly from e-commerce and tourism. Thanks to shrinking imports, the current-account surplus, which was 8.5 per cent of GDP in 2015, tends to stay high.
“This will continue for a while,” Veerathai said.
He added that private investment would recover only gradually. Some industries like telecommunications get a boost from investment in fourth-generation wireless and new technology. Huge investment has also been witnessed in the renewable-energy sector. However, growth in sectors with excess supply will be dependent on the global condition.
“The past boom times won’t return. The automobile sector, for instance, still invests but not as much as in the past. New investment is geared towards efficiency and new technology,” he said.