Thai economy to grow 3.8% in line with uptrend in Asia

Combined with the govern-|ment’s economic stimulus poli-|cies, including mega-project in-|vestment in the public and private sectors, this has increased employment and consumption. 

The low interest rates in the US have sent investments into emerging Asia’s financial market, especially in Thailand and India. 

Michael Heise, chief economist at Allianz, said that at the beginning of this year, the global economy is expected to grow due to many factors including the unexpectedly drastic slide in oil prices, monetary policy that supports government and private investment and the tightening of fiscal policy. All of these lead to more market liquidity. 

This acceleration is attributable in 

 full to industrialised countries, while growth in many major emerging market economies continues to be dampened by structural problems. 

With an expected GDP increase of 4 per cent in 2015, growth in these countries will still be considerably higher than in the industrialised world. 

In the eurozone, the economic recovery is likely to continue this year, supported by the euro’s depreciation and the fall in energy prices. 

Growth in most crisis-ridden member states is expected to outpace last year’s performance, although uncertainty about the economic policies of certain member states could weigh on sentiment. 

Supported by brighter economic conditions in the eurozone and a favourable environment for private consumption, the German economy could expand by 2.1 per cent this year.

 

Geopolitical tensions

Financial market developments this year will primarily be driven by monetary policy and geopolitical tensions, such as the conflict between Russia and the Ukraine. Barring a major downside surprise on growth, the Federal Reserve will likely start to push up interest rates this year.

In contrast, in an effort to stem deflationary pressures and stimulate growth in the eurozone, the European Central Bank has further loosened its monetary policy stance with the announcement of a bond-purchasing programme with a monthly volume of 60 billion euros. 

“This program will not only weigh on European government benchmark bond yields, but also exert considerable downward pressure on bond spreads of debt-ridden eurozone countries,” Heise said yesterday. 

Growth dynamics are diverging in emerging Asia. Growth is expected to accelerate in India and Thailand this year, while growth is likely to decelerate somewhat in China and Malaysia. 

Emerging Asia will account for more than half of this year’s global economic growth, which is expected to be 3 per cent. 

Low interest rates in the US over the past few years have spurred inflows of funds into emerging Asia’s local bond markets as investors chased yield. 

Since foreign holdings of financial assets have increased, there is the risk of renewed financial market volatility in case of a sudden withdrawal of foreign capital from local bond markets, triggered by surprises in the path of Fed tightening. 

China faces major challenges: rebalancing the economy, slowing down investment and lending, and deflating local real estate bubbles. 

“We are confident that China will successfully cope with these challenges and avoid a hard landing of the Chinese economy, especially since the government has the fiscal capacity to take any economic policy measures that might be necessary to counter any overly swift economic slowdown.”

GDP growth is expected to slow moderately to 7 per cent this year from 7.4 per cent last year.

Growth momentum picked up in the fourth quarter of last year. This higher momentum is likely to be sustained into this year, thanks to a moderate recovery in private consumption and a slight pickup in private investment. 

The Thai economy is expected to expand by 3.8 per cent this year, up from 0.7 per cent last year.

The political unrest left its mark in the insurance market. Gross premium growth decreased to a below long-term average 9 per cent last year. 

Average per capita spending increased to 240 euros (Bt8,390), which is still markedly higher than the 180 euros spent by the average Chinese last year. 

“Despite an already comparatively high insurance penetration of 5.2 per cent, we expect the insurance market to sustain its growth dynamic in the next years. Until 2025 we expect average yearly growth of 10 per cent,” he added.