ADB puts Thai economic growth at 4.9% this year

Economic growth is being driven by continuous expansion in private consumption and investment, which has moderated from last year’s level, as well as the government’s investment, particularly in water management and the Bt2-trillion infrastructure project, which kicks off early next year, said the ADB.

However, there are some risks to the outlook, which include delay in implementation of government investment projects and capital inflows that put upward pressure on the baht, damaging export competitiveness.

Luxmon Attapich, the ADB’s senior country economist, yesterday said that out of the Bt2-trillion infrastructure budget, between Bt30 billion and Bt40 billion would be disbursed by the government next year. 

The government also plans to spend another Bt80 billion next year on the water-management project, following the Bt35 billion-Bt40 billion that will be invested in the project this year.

She listed the key challenges facing the country as off-budget borrowing by the government, high public debt, how to increase revenue collection, and governance. 

Much depends on how the government develops the monitoring system for its off-budget spending, she added.

Craig M Steffensen, ADB country director, said the government should allocate part of the Bt2-trillion investment budget for high-priority matters, including the rehabilitation of the rail system operated by the State Railway of Thailand, the improvement of infrastructure and services in the agricultural sector, and the development of the Eastern Seaboard. 

“The ADB welcomes the government’s huge investment in transport infrastructure. We believe disbursement will result in economic growth and development that will serve Thailand well. We hope the authorities will invest in modernisation of the education sector with the same determination they have shown with respect to infrastructure,” he said.

High-speed rail transport, costing  about US$150 million per kilometre, has its place and time in Thailand, as in any country, he said, adding that from the ADB’s perspective, retaining and modernising the existing State Railway of Thailand system is priority number one. 

The second priority is the establishment of linkages with neighbouring countries, including Vietnam, China, India and Myanmar.

Luxmon said that while Japan’s quantitative easing would result in a better economic situation in Japan itself, the measure would not affect Thailand’s economy due to the depreciation of the yen. 

She also said there were as yet no critical signs of a bubble developing in the Thai economy.

Although the local stock exchange had risen sharply, it is now slowing down. Moreover, although the property price index is on the rise, it is not on a sharp upward curve. 

However, the situation needs to be monitored closely, she added.

According to an ADB report, rising private consumption and stronger intra-regional trade will spur a pick-up in growth in developing Asia both this year and next, as economic activity in the US and Europe remains in the doldrums.

ADB chief economist Changyong Rhee said the rebound in China and solid momentum in Southeast Asia were lifting the region’s pace after the softer performance of last year.

Domestic spending, in particular consumption, is the main driver of the recovery and is a welcome shift from the reliance on the markets of advanced economies, he said.

The “Asian Development Outlook 2013”, the ADB’s flagship annual economic publication, forecasts gross-domestic-product growth in developing Asia of 6.6 per cent this year, and 6.7 per cent in 2014. 

Last year, the region grew 6.1 per cent.

The report warns that political risks linked to wrangling over the US debt ceiling, fatigue over tough austerity measures in the euro zone, and long simmering tensions over border disputes in Asia present the main threats to the near-term outlook. 

It notes that the region’s favourable fiscal position cannot be taken for granted, with improved revenue efficiency, better governance and other longer-term structural issues needing to be addressed.