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Thai economy picks up, but growth momentum remains unclear

Nov 16. 2015
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By The Nation

The Office of National Economic and Social Development Board expects the Thai economy to grow 3-4 per cent in 2016, thanks mainly to government spending and a recovery in exports.
Paramethi Wimolsiri, the NESDB’s secretary-general, said that the export sector should register a 3 per cent growth next year. Meanwhile, the positive impacts of the stimulus measures would kick in. The baht should weaken against the US dollar while agricultural crop prices should recover. Fuel oil prices will remain low and the tourism industry should continue to be bouyant. 
"The budget deficit of Bt390 billion in the 2016 fiscal year, compared to Bt250 billion, would boost government spending. Infrastructure investment projects should also show progress," he said. 
In 2016, Thailand is expected to post U$29.6 billion in trade surplus and $22.2 billion in current account surplus.
The economy is also expected to face some headwinds next year, if China's economy further slides or if other key regional currencies like yuan weaken beyond expectation. Drought impacts are also expected to continue.   
The NESDB revealed today that the Thai economy expanded 2.9 per cent in the third quarter compared to the same period last year, thanks mainly to household and government spending.
The growth picked up the pace from 2.8 per cent year on year in the second quarter. 
In the quarter, the public sector investment expanded 15.9 per cent on year. However, private investment contracted further; the construction investment index declined 0.3 per cent after 2.7 per cent increase in the second quarter. The manufacturing production index contracted 6.1 per cent on year. 
"There's a chance that the full-year growth rate would be above our forecast at 2.2 per cent," Siam Commercial Bank's Economic Intelligence Unit said. It is optimistic that the stimulus measures should show positive impacts and spur private consumption and investment, while tourism figures should continue to increase. However, low commodities prices and possible drought next year would be significant negative factors to the private-sector income and discourage household consumption, while the export sector would remain subdued.
DBS economist Gundy Cahyadi noted that government spending should start to show positive impacts only in early 2016. 
"Sentiment among consumers and businesses have ticked up slightly. Whether or not this will translate to actual spending remains to be seen," he said.
He noted that GDP growth momentum next year is still largely dependent on a ramp-up in public sector investment  
"The government seems willing to sustain a supportive stance for now and, more importantly, fiscal disbursement has been on track with targets. An upswing in private consumption will be a plus. At least for now, a significant improvement in private consumption growth appears unlikely. Stronger income growth will be helpful, if we were to expect private consumption growth to trend above 3 per cent once again. But nominal wage growth is practically zero at present. Even if the government’s stimulus efforts will clearly be a boost, expect the impact to be lagged. The 4 per cent GDP growth remains some distance away," he said.

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