Thai growth revised upwards to 3.9 per cent

Economy October 13, 2017 01:00


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THAILAND’S 2017 economic growth forecast has been revised up to 3.9 per cent from the earlier estimate of 3.6 per cent on the back of higher-than-expected recoveries in exports and tourism and acceleration in public spending, according to the University of the Thai Chamber of Commerce (UTCC)’s Centre for Economic and Business Forecasting.

Thanawat Polvichai, the centre’s director, said the local economy would likely make a continued recovery this year, with exports forecast to rise 7.5 per cent and inflation at 0.6 per cent, he said.

Economic growth is projected at 4.2 per cent next year on the back of continued export expansion, massive infrastructure investments and up to Bt40 billion to Bt50 billion expected to be spent for the 2018 election, he said. 

The economy is estimated to grow at an average of 4-5 per cent per annum thereafter to 2021. Inflation is expected at 1.5 per cent next year and 2 per cent and more during 2020-2021.

Saowanee Thairungroj, UTCC rector, said based on a recent survey in 2017, about 91 per cent of Thai households were indebted, while only 8.9 per cent were debt-free. Most of the household debts were incurred in general spending, followed by asset purchases and debt repayments.

This year, debts averaged at Bt299,266 per household, up 0.4 per cent from the previous year , marking the lowest rise in 10 years, she said. Of the total household debts, 74.6 per cent were incurred through the formal system with the unregulated system accounting for the remaining 26.4 per cent. 

The proportion of debtors in the formal system rose, while those in the informal system represented the biggest drop in 10 years, partly a result of the government’s supervision of the informal sector. 

According to the survey, the indebted households have to shoulder an average repayment amount of Bt15,438.92 per month.

A survey found most households spending less in both value and volume this year due to the higher cost of living. It also found that some households were following the sufficiency economy philosophy, while others had higher debt burden and less spending power due to the higher prices of goods.

Regarding the government’s welfare card project, most cardholders said it would help increase liquidity and give a boost to the economy.

Meanwhile, TRIS Rating expects Thailand’s gross domestic product (GDP) to grow by between 3.3 per cent and 3.6 per cent this year, compared with 3.2 per cent last year, driven by a recovery in exports, continued growth in the tourism industry, and a rise in household expenditure.

However, TRIS Rating is still concerned about external risk factors such as risks to the global economy, the high level of household debt and the floods.

Among the supporting factors for the growth are that exports will keep rising in the second half of this year. The economies of Thailand’s major trading partners, such as the United States, Japan and China, are improving. These nations comprise around 31 per cent of Thai exports by value.

The tourism industry is expected to see strong growth this year. Tourism showed signs of recovery after a temporary drop due to the suppression of zero-dollars tours. The crackdown, which affected Chinese tourists, took effect in September 2016. The Bank of Thailand has forecast 35.6 million foreign tourists in 2017.

Household expenditure will expand in the second half of 2017. Household income in the agricultural sector and related business sectors is likely to improve as agricultural production recovers. Moreover, income in the export-oriented manufacturing sector and the tourism sector will increase in the second half of the year as exports rise and foreign tourist arrivals and tourism receipts increase, according to TRIS.

Private investment will recover due to expansions in machinery and equipment sector, and the construction, it said. 

The manufacturing sector will see improvement as exports rise. Construction expenditure will rise because of increase in the number of permitted construction areas.

Public investment is expected to speed up over the remainder of this year as disbursements from the annual government budget and the supplementary budget framework both increase, TRIS estimated. Disbursements of instalment payments, as requested by project contractors, will also increase.

US economic policies, such as trade policy or the implementation of trade measure to limit unfair competition from other countries, may affect investor confidence. Other external risk factors include the effect of Brexit, the uncertain monetary policies of the US, Europe and Japan, and the fluctuations of commodity prices worldwide.

Flooding in Thailand will affect agricultural production and farm incomes, resulting in a rise in the level of household debt and a slowdown household consumption, it said.