Private spending to get a boost in 2016

The NESDB revealed that it expects the domestic economy to expand by 3-4 per cent in 2016. Private investments, which accounted for 15-20 per cent of the country’s gross domestic product (GDP), are expected to expand by 4.7 per cent compared with minus 2 per cent in 2014 and the expected contraction of 1.3 per cent for this year.

Domestic consumption, which accounted for 50 per cent of the GDP, is also expected to expand as private consumption is expected to expand by 2.6 per cent compared with 0.6 in 2014 and 2 per cent forecast for 2015, while government consumption is expected to increase to 3.2 per cent in 2016 compared with 1.7 per cent in 2014 and 2.7 per cent forecast for 2015.

Government spending accounted for 15-20 per cent of the GDP.

“Factors that will support Thailand’s economy next year are the acceleration of the flow of capital being injected into the economy by the government with a budget deficit of around Bt390 billion for fiscal 2016, which is higher than the Bt250 deficit in fiscal 2015. This does not include the progress in the government investment on infrastructures,” said Porametee Vimolsiri, secretary general of the NESDB.

The office said the domestic economy expanded by 2.9 per cent in the third quarter and fared slightly better than the 2.8 per cent growth in the second quarter, which means that it now expects the economy to expand by 2.9 per cent in 2015 compared with 0.9 per cent GDP growth in 2014.

Chirathep Senivongs Na Ayudhya, the spokesman of the Bank of Thailand (BOT), said the NESDB projections of 2.9 GDP growths in 2015 and 3.0-4.0 per cent for 2016 is in line with the BOT’s assessment in the previous Monetary Policy Committee’s meeting on November 4. 

 

Gradual recovery 

The economy should gradually recover in the next period from government injection of capital into the market system and the stimulus measures but there is still some downside risks in the potentials of private investment and export from external factors such the slowdown in China and other Asian economies, the fluctuation in the world’s money markets and geopolitical risk on the global economy, he said.

Sarun Sunansathaporn, economist at Bank of Ayudhya’s Research Department, said the bank expects the sequential quarter-to-quarter momentum to gain strength from 2.9 per cent in the third quarter to 3.1 per cent in the fourth quarter, which means that the bank now expects an expansion of 2.9 per cent for the full 2015 instead of the previous 2.7 per cent projection.

“Looking ahead into next year, we expect a moderate recovery to continue, with economic growth projected to improve to 3.2 per cent for 2016. Public spending should remain the key engine of economic growth, on the back of the government’s infrastructure investment plans, acceleration in budget disbursement, and state-owned enterprises’ substantial investment backlogs,” he said.

“However, growth in private consumption should remain modest, hampered by stubbornly high household debt, low agricultural prices and the adverse impact of drought,” he added. 

Porametee said the export sector, which accounted for 65-70 per cent of the GDP, contracted by 4.7 per cent in the third quarter to US$54.224 billion due to the slowdown of major trading partners, especially China and Japan, but Thai exports are expected to expand by 3 per cent compared with 5 per cent forecast for 2015 as the baht is expected to remain at Bt36-Bt37 per US dollar next year from the expected hike of the US interest rates in 2016 along with the gradual recovery of the global economy.

He said the NESDB expects demand for oil to increase next year in line with the global economic recovery led by the US and it expects global oil prices to be $50-$60 per barrel.