Consumption key in forecast GDP growth of up to 4.3%

Economy February 07, 2019 01:00

By THE NATION

5,005 Viewed

THE economy is expected to grow |4-4.3 per cent this year, led by private consumption and investment, according to the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB).



However, pressured by the trade war between the US and China and the likely global economic slowdown, exports are estimated to grow 5-7 per cent this year, compared with the 6.7 per cent export increase achieved last year, the peak private-sector grouping said.

Growth in gross domestic product (GDP) for last year is forecast to come in at 4.1 per cent.

The JSCCIB expressed concerns over the baht’s seeming upward trend in the first half of this year, warning that exports will be affected if it continues to appreciate.

The currency strengthened 3.4 per cent against the US dollar in January as the greenback depreciated. The baht had the second highest bump among regional peers in the first month of 2019, behind the Indonesian rupiah at a 3.7 per cent appreciation.

With respect to the other major economic indicator – tourism – the number of foreign tourists is expected to rise in 2019 at rate close to last year’s 7.5 per cent growth, with visitor numbers expected to rise from major markets including China.

Other factors to be monitored include Thailand’s election results, the establishment of a new government, progress in the superpowers’ trade dispute, uncertainty over Britain’s exit from the European Union and the baht’s movements.

On the credit front, the Bank of Thailand’s Monetary Policy Committee (MPC) meeting yesterday voted 4 to 2 to maintain the policy rate at 1.75 per cent, according to MPC secretary Titanun Mallikamas.

Two members voted to raise the policy rate by 0.25 percentage point from 1.75 to 2 percent. One MPC member was unable to attend the meeting.

In deliberating their policy decision, the committee assessed that the economy would continue to gain traction on the back of domestic demand despite a slowdown in external demand.

Headline inflation was restrained by lower energy prices and subject to increased downside risks, while core inflation would edge up in line with previous projection. Overall financial conditions remained accommodative and conducive to economic growth. 

However, there were risks to financial stability in the future that warranted close monitoring. The committee viewed that the current accommodative monetary policy stance had contributed to the continuation of economic growth and was appropriate given the inflation target. Thus, most members decided to keep the policy rate unchanged at the meeting. 

The two dissenting members viewed that the economy had continued expanding around its potential, and that overall financial conditions would remain accommodative to economic growth despite an additional 0.25 percentage point increase in the policy rate. Hence, their voted to raise the policy rate in order to curb financial stability risks.

The economy is projected to continue to gain traction although the external demand might slow down. The committee viewed that “accommodative monetary policy would remain appropriate in the period ahead, and it would continue to monitor developments of economic growth, inflation, and financial stability, together with associated risks.”