Year's projection hiked to 5.7%; health of EU banks may have global impact
Economic data for May suggest Thailand’s economic recovery is on track despite the European crisis, and the Finance Ministry has upgraded its GDP growth projection to 5.7 per cent, from 5.2 per cent estimated previously.
“Household consumption, private investment and public investment will be key drivers for growth, and the risk is the health of banks in Europe and its impact on the rest of the world,” said Somchai Jujjapongse, a senior ministry official.
Car sales last month jumped 137.5 per cent and motorcycle sales 14.7 per cent year on year as consumers were willing to spend despite the slowdown of the global economy and persisting economic trouble in Europe, Somchai, director-general of the Fiscal Policy Office, told a news conference yesterday.
The first-car tax-incentive scheme, wage increases and other measures contributed to consumer confidence, he said.
Value-added-tax collection, after adjusting for the abnormal events of last year, grew by 15 per cent last month, indicating rising consumer spending, he said.
Private investment also showed signs of further recovery after the devastating flood last year, as sales of commercial vehicles rose by 85.8 per cent compared with May 2011, he said.
Import of capital goods also expanded 21.3 per cent, which further suggested a rise in private investment, he said.
Tourist arrivals increased 8.3 per cent in the January-to-May period, which was better than predicted, he said. Somewhat surprisingly, the number of tourists from Europe rose 12.68 per cent in the first five months even though many countries in that continent have faced economic woes.
Preliminary figures show the industrial production index rose in May for the first time since the floods, at 5.5 per cent, while the agricultural production index expanded 7.3 per cent, up from a minus-0.2 per cent in April.
Oil prices also dropped, which supported growth, Somchai said.
“Because of many positive factors, the office has revised upwards the GDP growth projection to 5.7 per cent year on year from 5.5 per cent forecast earlier, and domestic demand will play a key role,” he said.
Private consumption is expected to expand 5.1 per cent, up from 1.3-per-cent growth last year, private investment to grow 13.5 per cent, up from 7.2 per cent, and public investment will expand 9.7 per cent, up from minus-8.7 per cent last year.
Exports in US dollar terms are expected to grow 12.8 per cent this year, lower than the government target of 15 per cent. Exports are still important for growth in gross domestic product, he said.
Import growth will be high at 22.3 per cent and will narrow the trade surplus to US$7.4 billion (Bt236 billion) this year from $23.5 billion last year, he said.
After the country had a current-account surplus for 10 years, this year it will turn into a deficit, expected to be about $1.3 billion, or equivalent to 0.4 per cent of GDP, he said. “It should not be an issue for concern, since the deficit is caused by rising investment, which is good for future growth.”
Direct impact from Europe will not be much, as that region’s share of Thai exports is just 9.4 per cent, or more than Bt100 billion, Somchai said. Of greater concern is the indirect impact – a slowdown of the economies of other countries.
“If the health of banks in Europe deteriorates, it could seriously affect real economic sectors, and then it would have a contagion effect on other parts of the world,” he said, but added that he believed European leaders would be able to manage their economies.
The Finance Ministry projected the crude-oil price at about $113 per barrel, down from $118 estimated previously.