Krungsri Research predicts that the Thai economy will continue to grow by 4.1 per cent in 2019, close to the 4.3 per cent growth of 2018 and exceeding the post-crisis average of 3.8 per cent.
Private consumption and private investment will be the major catalyst for growth, helping to offset the slowdown in external demand, they say. The expectation of clearer economic policies after Thailand’s general election should help build confidence among domestic and foreign investors, the report predicts.
Somprawin Manprasert, the Krungsri head of research and chief economist, said, “Domestic spending will play a more important role in driving the economy next year. Private consumption is likely to enter the upcycle after the capacity utilisation rate of several industries hit multi-year highs. Driven by the acceleration of public-private partnerships (PPP fast track), the investment in infrastructure mega projects is expected to reach Bt281 billion in 2019 from Bt98 billion in 2018.
“In addition, Thailand will benefit from an increase in foreign direct investments, partly due to the relocation to avoid negative impact from the US-China trade war,” Somprawin said.
Private consumption is expected to continue its growth momentum, said Somprawin, driven by a rise in both farm and non-farm incomes, and an increase in non-farm employment. In addition, accelerating investment in mega projects, the increasing budget for welfare cardholders and several supporting projects to help specific groups including farmers, the aged and SMEs, will encourage domestic consumption and investment.
After strong growth during the past two consecutive years, Krungsri Research predicts the growth of Thai exports is likely to be moderate at 4.5 per cent in 2019, reflecting the slowdown in the global economy and the impacts of trade protectionism between the US and China.
However, Thailand could benefit from trade with high-growth countries in Asia.
Thai tourism is also likely to recover from late 2018 after the government exempted visa-on-arrival fees for tourists from 21 countries including China and India.
Moreover, the sector is expected to benefit from the rising middle class in Asia and the capacity expansion of major airports to serve the rising number of tourists.
“The overall positive economic momentum has resulted in a gradual increase in inflation, which is expected to be at 1.5 per cent in 2019 from 1.1 per cent in 2018. Krungsri Research expects the Monetary Policy Committee will need to normalise the monetary policy by raising the policy rate to 2.00 per cent in March 2019 after the latest raise to 1.75 per cent in December 2018 to reduce risks to financial and economic stability in the long term.” Somprawin added.