CENTRAL bank governor Veerathai Santiprabhob is encouraged by the latest indicators pointing to improved economic conditions, but is concerned about sluggish income growth for workers and households.
At a seminar jointly hosted by Bangkok Bank and Bualuang Securities, Veerathai said yesterday that the economic conditions over the past two months of this year have been better than prior projections.
Exports have continued to expand from the brisk pace set last year and imports have also been rising. The latter suggested that private investment would also increase, Veerathai said.
The Bank of Thailand projected late last year that the economy would expand 3.9 per cent in 2018, matching the growth in 2017.
The central bank will by the end of this month review its economic projections.
Veerathai’s statement suggests that the BOT may upgrade its economic growth forecast to 4 per cent or higher.
The Thai economy largely depends on the global economy, which is expected to build on its growth momentum from last year.
Major economies, such as the United States and Japan and in the European Union, have shown clear sign of recovery, Veerathai said.
The economic expansion has led to lower unemployment rates in those countries. The jobless rate in the US is only 4.1 per cent compared with the range of 4.6-4.7 per cent that is considered to indicate full employment. Unemployment in Europe remains high but it is on a decreasing trend.
In Japan, the number of jobs exceeds that of the country’s working age population.
Thailand’s exports will benefit from the global expansion and its gains will spread to more sectors, including food exports, Veerathai said. Tourism will also further boost the economy.
However, export growth in the electronics sector did not translate into increased employment as manufacturers installed more robots instead of hiring more people, said Veerathai.
Moreover, labour is moving from the manufacturing sector to the traditional service sector, such as retail trading, hotels and restaurants, which offer lower paid jobs compared with those in manufacturing, he said.
Farmers still face with low prices for farm products in the global market. The trend towards lower-paid jobs and sluggish agricultural prices, combined with an ageing population, has led to dwindling incomes for many workers and households, Veerathai said.
He also warned against the impact of volatility in the baht exchange rate due to external factors.
“Nobody or no guru knows what US President Donald Trump will do next,” said Veerathai, referring to the reduced confidence among investors in US policies that have caused a weaker US dollar and, conversely, strength in the baht and other currencies.
He also said that firms borrowed too much would face challenges as interest rates are on a rising trend.
However, he added that so far the BOT has not been under pressure to raise the policy rate from its current 1.5 per cent.
He did not foresee any immediate threats to the Thai economy or to the stability of financial institutions.
However, to prepare for risks, the BOT submitted a legislative amendment to the National Legislative Assembly yesterday. The bill aims to create a mechanism to prevent systemic risks in the financial sector and spare the public from shouldering the cost of rescuing failing banks in the future, Veerathai added.
Meanwhile, Bualuang Securities president Pichet Sithi-Amnuai said the Stock Exchange of Thailand Index is likely to trade sideways, though it may reach 1,880 points in middle of this year.